Correlation Between PIMCO 1 and Mechanics Bank
Can any of the company-specific risk be diversified away by investing in both PIMCO 1 and Mechanics Bank 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 1 and Mechanics Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PIMCO 1 5 Year and Mechanics Bank, you can compare the effects of market volatilities on PIMCO 1 and Mechanics Bank 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 1 with a short position of Mechanics Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO 1 and Mechanics Bank.
Diversification Opportunities for PIMCO 1 and Mechanics Bank
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PIMCO and Mechanics is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 1 5 Year and Mechanics Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mechanics Bank and PIMCO 1 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 1 5 Year are associated (or correlated) with Mechanics Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mechanics Bank has no effect on the direction of PIMCO 1 i.e., PIMCO 1 and Mechanics Bank go up and down completely randomly.
Pair Corralation between PIMCO 1 and Mechanics Bank
Given the investment horizon of 90 days PIMCO 1 is expected to generate 26.2 times less return on investment than Mechanics Bank. But when comparing it to its historical volatility, PIMCO 1 5 Year is 6.21 times less risky than Mechanics Bank. It trades about 0.03 of its potential returns per unit of risk. Mechanics Bank is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,400,000 in Mechanics Bank on January 25, 2024 and sell it today you would earn a total of 200,000 from holding Mechanics Bank or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
PIMCO 1 5 Year vs. Mechanics Bank
Performance |
| Timeline |
| PIMCO 1 5 |
| Mechanics Bank |
PIMCO 1 and Mechanics Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO 1 and Mechanics Bank
The main advantage of trading using opposite PIMCO 1 and Mechanics Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO 1 position performs unexpectedly, Mechanics Bank 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 Mechanics Bank will offset losses from the drop in Mechanics Bank's long position.| PIMCO 1 vs. iShares iBoxx Investment | PIMCO 1 vs. iShares 1 3 Year | PIMCO 1 vs. iShares 7 10 Year | PIMCO 1 vs. iShares Core Aggregate |
| Mechanics Bank vs. Stevia Nutra Corp | Mechanics Bank vs. Regent Ventures | Mechanics Bank vs. Element Global | Mechanics Bank vs. Affiliated Resources Corp |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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