Correlation Between PIMCO Monthly and IShares Fundamental

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

By analyzing existing cross correlation between PIMCO Monthly Income and iShares Fundamental Hedged, you can compare the effects of market volatilities on PIMCO Monthly and IShares Fundamental 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 Monthly with a short position of IShares Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Monthly and IShares Fundamental.

Diversification Opportunities for PIMCO Monthly and IShares Fundamental

-0.35

Correlation Coefficient

PIMCO Monthly  IShares Fundamental

Very good diversification

The 3 months correlation between PIMCO and IShares is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Monthly Income and iShares Fundamental Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Fundamental and PIMCO Monthly 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 Monthly Income are associated (or correlated) with IShares Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Fundamental has no effect on the direction of PIMCO Monthly i.e., PIMCO Monthly and IShares Fundamental go up and down completely randomly.

Pair Corralation between PIMCO Monthly and IShares Fundamental

Assuming the 90 days trading horizon PIMCO Monthly Income is expected to under-perform the IShares Fundamental. But the fund apears to be less risky and, when comparing its historical volatility, PIMCO Monthly Income is 3.54 times less risky than IShares Fundamental. The fund trades about -0.2 of its potential returns per unit of risk. The iShares Fundamental Hedged is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,434  in iShares Fundamental Hedged on September 23, 2024 and sell it today you would lose (2.00) from holding iShares Fundamental Hedged or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

PIMCO Monthly Income  vs.  iShares Fundamental Hedged

PIMCO Monthly Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Monthly Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, PIMCO Monthly is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Fundamental Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Fundamental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PIMCO Monthly and IShares Fundamental

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

The idea behind PIMCO Monthly Income and iShares Fundamental Hedged 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.