Correlation Between PIMCO ETF and Intermediate Municipal

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

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

Diversification Opportunities for PIMCO ETF and Intermediate Municipal

0.94

Correlation Coefficient

PIMCO ETF  Intermediate Municipal

Almost no diversification

The 3 months correlation between PIMCO and Intermediate is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO ETF Trust and Intermediate Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Municipal and PIMCO ETF 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 ETF Trust are associated (or correlated) with Intermediate Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Municipal has no effect on the direction of PIMCO ETF i.e., PIMCO ETF and Intermediate Municipal go up and down completely randomly.

Pair Corralation between PIMCO ETF and Intermediate Municipal

Given the investment horizon of 90 days PIMCO ETF Trust is expected to generate 1.34 times more return on investment than Intermediate Municipal. However, PIMCO ETF is 1.34 times more volatile than Intermediate Municipal Income. It trades about 0.08 of its potential returns per unit of risk. Intermediate Municipal Income is currently generating about 0.06 per unit of risk. If you would invest  4,532  in PIMCO ETF Trust on September 3, 2024 and sell it today you would earn a total of  65.00  from holding PIMCO ETF Trust or generate 1.43% return on investment over 90 days.

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

PIMCO ETF Trust  vs.  Intermediate Municipal Income

PIMCO ETF Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO ETF Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, PIMCO ETF is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Intermediate Municipal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Municipal Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Intermediate Municipal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PIMCO ETF and Intermediate Municipal

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

The idea behind PIMCO ETF Trust and Intermediate Municipal Income 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.