Correlation Between Foreign Bond and Pimco Trends

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

By analyzing existing cross correlation between Foreign Bond Fund and Pimco Trends Managed, you can compare the effects of market volatilities on Foreign Bond and Pimco Trends 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 Foreign Bond with a short position of Pimco Trends. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foreign Bond and Pimco Trends.

Diversification Opportunities for Foreign Bond and Pimco Trends

-0.77

Correlation Coefficient

Foreign Bond  Pimco Trends

Pay attention - limited upside

The 3 months correlation between Foreign and Pimco is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Foreign Bond Fund and Pimco Trends Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Trends Managed and Foreign Bond 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 Foreign Bond Fund are associated (or correlated) with Pimco Trends. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Trends Managed has no effect on the direction of Foreign Bond i.e., Foreign Bond and Pimco Trends go up and down completely randomly.

Pair Corralation between Foreign Bond and Pimco Trends

Assuming the 90 days horizon Foreign Bond Fund is expected to generate 1.09 times more return on investment than Pimco Trends. However, Foreign Bond is 1.09 times more volatile than Pimco Trends Managed. It trades about 0.07 of its potential returns per unit of risk. Pimco Trends Managed is currently generating about -0.09 per unit of risk. If you would invest  781.00  in Foreign Bond Fund on March 7, 2025 and sell it today you would earn a total of  6.00  from holding Foreign Bond Fund or generate 0.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Foreign Bond Fund  vs.  Pimco Trends Managed

Foreign Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Foreign Bond Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Foreign Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Trends Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco Trends Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Foreign Bond and Pimco Trends

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

The idea behind Foreign Bond Fund and Pimco Trends Managed 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.