Correlation Between PIMCO Enhanced and IShares ESG

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

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

Diversification Opportunities for PIMCO Enhanced and IShares ESG

0.63

Correlation Coefficient

PIMCO Enhanced  IShares ESG

Poor diversification

The 3 months correlation between PIMCO and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Enhanced Low and iShares ESG 1 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG 1 and PIMCO Enhanced 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 Enhanced Low are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG 1 has no effect on the direction of PIMCO Enhanced i.e., PIMCO Enhanced and IShares ESG go up and down completely randomly.

Pair Corralation between PIMCO Enhanced and IShares ESG

Given the investment horizon of 90 days PIMCO Enhanced is expected to generate 2.5 times less return on investment than IShares ESG. In addition to that, PIMCO Enhanced is 1.05 times more volatile than iShares ESG 1 5. It trades about 0.01 of its total potential returns per unit of risk. iShares ESG 1 5 is currently generating about 0.01 per unit of volatility. If you would invest  2,482  in iShares ESG 1 5 on September 4, 2024 and sell it today you would earn a total of  3.00  from holding iShares ESG 1 5 or generate 0.12% return on investment over 90 days.

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

PIMCO Enhanced Low  vs.  iShares ESG 1 5

PIMCO Enhanced Low

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Enhanced Low has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PIMCO Enhanced is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

iShares ESG 1

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG 1 5 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PIMCO Enhanced and IShares ESG

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

The idea behind PIMCO Enhanced Low and iShares ESG 1 5 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.