Correlation Between PIMCO Broad and PIMCO 1

Can any of the company-specific risk be diversified away by investing in both PIMCO Broad and PIMCO 1 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 Broad and PIMCO 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PIMCO Broad TIPS and PIMCO 1 5 Year, you can compare the effects of market volatilities on PIMCO Broad and PIMCO 1 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 Broad with a short position of PIMCO 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Broad and PIMCO 1.

Diversification Opportunities for PIMCO Broad and PIMCO 1

0.96

Correlation Coefficient

PIMCO Broad  PIMCO 1

Almost no diversification

The 3 months correlation between PIMCO and PIMCO is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Broad TIPS and PIMCO 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO 1 5 and PIMCO Broad 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 Broad TIPS are associated (or correlated) with PIMCO 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO 1 5 has no effect on the direction of PIMCO Broad i.e., PIMCO Broad and PIMCO 1 go up and down completely randomly.

Pair Corralation between PIMCO Broad and PIMCO 1

Given the investment horizon of 90 days PIMCO Broad TIPS is expected to generate 1.86 times more return on investment than PIMCO 1. However, PIMCO Broad is 1.86 times more volatile than PIMCO 1 5 Year. It trades about 0.12 of its potential returns per unit of risk. PIMCO 1 5 Year is currently generating about 0.16 per unit of risk. If you would invest  5,233  in PIMCO Broad TIPS on May 7, 2025 and sell it today you would earn a total of  105.00  from holding PIMCO Broad TIPS or generate 2.01% return on investment over 90 days.

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

PIMCO Broad TIPS  vs.  PIMCO 1 5 Year

PIMCO Broad TIPS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Broad TIPS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PIMCO Broad is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PIMCO 1 5

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO 1 5 Year are ranked lower than 12 (%) 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.

Pair Trading with PIMCO Broad and PIMCO 1

The main advantage of trading using opposite PIMCO Broad and PIMCO 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO Broad position performs unexpectedly, PIMCO 1 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 1 will offset losses from the drop in PIMCO 1's long position.

The idea behind PIMCO Broad TIPS and PIMCO 1 5 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.