Correlation Between PIMCO 1 and IShares Short

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Can any of the company-specific risk be diversified away by investing in both PIMCO 1 and IShares Short 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 IShares Short 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 IShares Short Treasury, you can compare the effects of market volatilities on PIMCO 1 and IShares Short 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 IShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO 1 and IShares Short.

Diversification Opportunities for PIMCO 1 and IShares Short

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between PIMCO and IShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 1-5 Year and IShares Short Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares Short Treasury 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 IShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares Short Treasury has no effect on the direction of PIMCO 1 i.e., PIMCO 1 and IShares Short go up and down completely randomly.

Pair Corralation between PIMCO 1 and IShares Short

Given the investment horizon of 90 days PIMCO 1 is expected to generate 6.08 times less return on investment than IShares Short. In addition to that, PIMCO 1 is 12.18 times more volatile than IShares Short Treasury. It trades about 0.01 of its total potential returns per unit of risk. IShares Short Treasury is currently generating about 0.74 per unit of volatility. If you would invest  10,287  in IShares Short Treasury on December 29, 2023 and sell it today you would earn a total of  766.00  from holding IShares Short Treasury or generate 7.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

PIMCO 1-5 Year  vs.  IShares Short Treasury

 Performance 
       Timeline  
PIMCO 1-5 Year 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO 1 5 Year are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PIMCO 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
IShares Short Treasury 

Risk-Adjusted Performance

79 of 100

 
Low
 
High
Market Crasher
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Short Treasury are ranked lower than 79 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical indicators, IShares Short is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

PIMCO 1 and IShares Short Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PIMCO 1 and IShares Short

The main advantage of trading using opposite PIMCO 1 and IShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO 1 position performs unexpectedly, IShares Short 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 Short will offset losses from the drop in IShares Short's long position.
The idea behind PIMCO 1 5 Year and IShares Short Treasury pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.

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