Correlation Between Proshares Russell and PIMCO Mortgage

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

By analyzing existing cross correlation between Proshares Russell 2000 and PIMCO Mortgage Backed Securities, you can compare the effects of market volatilities on Proshares Russell and PIMCO Mortgage 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 Proshares Russell with a short position of PIMCO Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proshares Russell and PIMCO Mortgage.

Diversification Opportunities for Proshares Russell and PIMCO Mortgage

-0.19

Correlation Coefficient

Proshares Russell  PIMCO Mortgage

Good diversification

The 3 months correlation between Proshares and PIMCO is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and PIMCO Mortgage Backed Securiti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Mortgage Backed and Proshares Russell 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 Proshares Russell 2000 are associated (or correlated) with PIMCO Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Mortgage Backed has no effect on the direction of Proshares Russell i.e., Proshares Russell and PIMCO Mortgage go up and down completely randomly.

Pair Corralation between Proshares Russell and PIMCO Mortgage

Given the investment horizon of 90 days Proshares Russell 2000 is expected to generate 13.82 times more return on investment than PIMCO Mortgage. However, Proshares Russell is 13.82 times more volatile than PIMCO Mortgage Backed Securities. It trades about 0.01 of its potential returns per unit of risk. PIMCO Mortgage Backed Securities is currently generating about -0.08 per unit of risk. If you would invest  3,913  in Proshares Russell 2000 on September 3, 2024 and sell it today you would lose (132.00) from holding Proshares Russell 2000 or give up 3.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.65%
Values	Daily Returns

Proshares Russell 2000  vs.  PIMCO Mortgage Backed Securiti

Proshares Russell 2000

Risk-Adjusted Performance

1 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Proshares Russell 2000 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Proshares Russell is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

PIMCO Mortgage Backed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Mortgage Backed Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, PIMCO Mortgage is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Proshares Russell and PIMCO Mortgage

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

The idea behind Proshares Russell 2000 and PIMCO Mortgage Backed Securities 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.