Correlation Between PIMCO 1 and PIMCO Broad
Can any of the company-specific risk be diversified away by investing in both PIMCO 1 and PIMCO Broad 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 PIMCO Broad 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 PIMCO Broad TIPS, you can compare the effects of market volatilities on PIMCO 1 and PIMCO Broad 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 PIMCO Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO 1 and PIMCO Broad.
Diversification Opportunities for PIMCO 1 and PIMCO Broad
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PIMCO and PIMCO is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 1 5 Year and PIMCO Broad TIPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Broad TIPS 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 PIMCO Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Broad TIPS has no effect on the direction of PIMCO 1 i.e., PIMCO 1 and PIMCO Broad go up and down completely randomly.
Pair Corralation between PIMCO 1 and PIMCO Broad
Given the investment horizon of 90 days PIMCO 1 5 Year is expected to generate 0.49 times more return on investment than PIMCO Broad. However, PIMCO 1 5 Year is 2.05 times less risky than PIMCO Broad. It trades about 0.04 of its potential returns per unit of risk. PIMCO Broad TIPS is currently generating about -0.02 per unit of risk. If you would invest 5,032 in PIMCO 1 5 Year on January 20, 2024 and sell it today you would earn a total of 93.00 from holding PIMCO 1 5 Year or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO 1 5 Year vs. PIMCO Broad TIPS
Performance |
| Timeline |
| PIMCO 1 5 |
| PIMCO Broad TIPS |
PIMCO 1 and PIMCO Broad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO 1 and PIMCO Broad
The main advantage of trading using opposite PIMCO 1 and PIMCO Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO 1 position performs unexpectedly, PIMCO Broad 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 PIMCO Broad will offset losses from the drop in PIMCO Broad'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 |
| PIMCO Broad vs. iShares iBoxx Investment | PIMCO Broad vs. iShares 1 3 Year | PIMCO Broad vs. iShares 7 10 Year | PIMCO Broad 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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