Correlation Between PIMCO 15 and IShares TIPS
Can any of the company-specific risk be diversified away by investing in both PIMCO 15 and IShares TIPS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PIMCO 15 and IShares TIPS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PIMCO 15 Year and iShares TIPS Bond, you can compare the effects of market volatilities on PIMCO 15 and IShares TIPS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PIMCO 15 with a short position of IShares TIPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO 15 and IShares TIPS.
Diversification Opportunities for PIMCO 15 and IShares TIPS
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PIMCO and IShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 15 Year and iShares TIPS Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares TIPS Bond and PIMCO 15 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PIMCO 15 Year are associated (or correlated) with IShares TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares TIPS Bond has no effect on the direction of PIMCO 15 i.e., PIMCO 15 and IShares TIPS go up and down completely randomly.
Pair Corralation between PIMCO 15 and IShares TIPS
Given the investment horizon of 90 days PIMCO 15 Year is expected to under-perform the IShares TIPS. In addition to that, PIMCO 15 is 2.44 times more volatile than iShares TIPS Bond. It trades about -0.17 of its total potential returns per unit of risk. iShares TIPS Bond is currently generating about -0.12 per unit of volatility. If you would invest 10,673 in iShares TIPS Bond on January 20, 2024 and sell it today you would lose (97.00) from holding iShares TIPS Bond or give up 0.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
PIMCO 15 Year vs. iShares TIPS Bond
Performance |
| Timeline |
| PIMCO 15 Year |
| iShares TIPS Bond |
PIMCO 15 and IShares TIPS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO 15 and IShares TIPS
The main advantage of trading using opposite PIMCO 15 and IShares TIPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO 15 position performs unexpectedly, IShares TIPS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares TIPS will offset losses from the drop in IShares TIPS's long position.| PIMCO 15 vs. iShares iBoxx Investment | PIMCO 15 vs. iShares 1 3 Year | PIMCO 15 vs. iShares 7 10 Year | PIMCO 15 vs. iShares Core Aggregate |
| IShares TIPS vs. iShares iBoxx Investment | IShares TIPS vs. iShares 1 3 Year | IShares TIPS vs. iShares 7 10 Year | IShares TIPS vs. iShares Core Aggregate |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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