Correlation Between Great West and Pimco Inflation

Can any of the company-specific risk be diversified away by investing in both Great West and Pimco Inflation 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 Great West and Pimco Inflation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great West Inflation Protected Securities and Pimco Inflation Response, you can compare the effects of market volatilities on Great West and Pimco Inflation 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 Great West with a short position of Pimco Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and Pimco Inflation.

Diversification Opportunities for Great West and Pimco Inflation

0.85

Correlation Coefficient

Great West  Pimco Inflation

Very poor diversification

The 3 months correlation between Great and Pimco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Great West Inflation Protected and Pimco Inflation Response in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Inflation Response and Great West 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 Great West Inflation Protected Securities are associated (or correlated) with Pimco Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Inflation Response has no effect on the direction of Great West i.e., Great West and Pimco Inflation go up and down completely randomly.

Pair Corralation between Great West and Pimco Inflation

Assuming the 90 days horizon Great West is expected to generate 1.27 times less return on investment than Pimco Inflation. But when comparing it to its historical volatility, Great West Inflation Protected Securities is 1.71 times less risky than Pimco Inflation. It trades about 0.18 of its potential returns per unit of risk. Pimco Inflation Response is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  854.00  in Pimco Inflation Response on May 7, 2025 and sell it today you would earn a total of  23.00  from holding Pimco Inflation Response or generate 2.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Great West Inflation Protected  vs.  Pimco Inflation Response

Great West Inflation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Inflation Protected Securities are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Inflation Response

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Inflation Response are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Pimco Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Great West and Pimco Inflation

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

The idea behind Great West Inflation Protected Securities and Pimco Inflation Response 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.