Correlation Between IQ MacKay and PIMCO ETF

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

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

Diversification Opportunities for IQ MacKay and PIMCO ETF

0.6

Correlation Coefficient

IQ MacKay  PIMCO ETF

Poor diversification

The 3 months correlation between MMIT and PIMCO is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding IQ MacKay Municipal and PIMCO ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO ETF Trust and IQ MacKay 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 IQ MacKay Municipal are associated (or correlated) with PIMCO ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO ETF Trust has no effect on the direction of IQ MacKay i.e., IQ MacKay and PIMCO ETF go up and down completely randomly.

Pair Corralation between IQ MacKay and PIMCO ETF

Given the investment horizon of 90 days IQ MacKay is expected to generate 1.33 times less return on investment than PIMCO ETF. But when comparing it to its historical volatility, IQ MacKay Municipal is 1.27 times less risky than PIMCO ETF. It trades about 0.07 of its potential returns per unit of risk. PIMCO ETF Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,531  in PIMCO ETF Trust on August 30, 2024 and sell it today you would earn a total of  58.00  from holding PIMCO ETF Trust or generate 1.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

IQ MacKay Municipal  vs.  PIMCO ETF Trust

IQ MacKay Municipal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IQ MacKay Municipal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, IQ MacKay is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

PIMCO ETF Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO ETF Trust are ranked lower than 5 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IQ MacKay and PIMCO ETF

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

The idea behind IQ MacKay Municipal and PIMCO ETF Trust 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.