Correlation Between Quadratic Interest and PIMCO 15

Can any of the company-specific risk be diversified away by investing in both Quadratic Interest and PIMCO 15 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 Quadratic Interest and PIMCO 15 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Quadratic Interest Rate and PIMCO 15 Year, you can compare the effects of market volatilities on Quadratic Interest and PIMCO 15 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 Quadratic Interest with a short position of PIMCO 15. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quadratic Interest and PIMCO 15.

Diversification Opportunities for Quadratic Interest and PIMCO 15

0.92

Correlation Coefficient

Quadratic Interest  PIMCO 15

Almost no diversification

The 3 months correlation between Quadratic and PIMCO is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Quadratic Interest Rate and PIMCO 15 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO 15 Year and Quadratic Interest 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 Quadratic Interest Rate are associated (or correlated) with PIMCO 15. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO 15 Year has no effect on the direction of Quadratic Interest i.e., Quadratic Interest and PIMCO 15 go up and down completely randomly.

Pair Corralation between Quadratic Interest and PIMCO 15

Given the investment horizon of 90 days Quadratic Interest Rate is expected to under-perform the PIMCO 15. But the etf apears to be less risky and, when comparing its historical volatility, Quadratic Interest Rate is 1.6 times less risky than PIMCO 15. The etf trades about -0.33 of its potential returns per unit of risk. The PIMCO 15 Year is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  5,492  in PIMCO 15 Year on August 24, 2024 and sell it today you would lose (106.00) from holding PIMCO 15 Year or give up 1.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Quadratic Interest Rate  vs.  PIMCO 15 Year

Quadratic Interest Rate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quadratic Interest Rate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

PIMCO 15 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO 15 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, PIMCO 15 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Quadratic Interest and PIMCO 15

The main advantage of trading using opposite Quadratic Interest and PIMCO 15 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quadratic Interest position performs unexpectedly, PIMCO 15 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 15 will offset losses from the drop in PIMCO 15's long position.

The idea behind Quadratic Interest Rate and PIMCO 15 Year 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.