Correlation Between US Treasury and PIMCO ETF

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

By analyzing existing cross correlation between US Treasury 12 and PIMCO ETF Trust, you can compare the effects of market volatilities on US Treasury 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 US Treasury with a short position of PIMCO ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and PIMCO ETF.

Diversification Opportunities for US Treasury and PIMCO ETF

0.89

Correlation Coefficient

US Treasury  PIMCO ETF

Very poor diversification

The 3 months correlation between OBIL and PIMCO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 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 US Treasury 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 US Treasury 12 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 US Treasury i.e., US Treasury and PIMCO ETF go up and down completely randomly.

Pair Corralation between US Treasury and PIMCO ETF

Given the investment horizon of 90 days US Treasury is expected to generate 1.28 times less return on investment than PIMCO ETF. In addition to that, US Treasury is 2.59 times more volatile than PIMCO ETF Trust. It trades about 0.32 of its total potential returns per unit of risk. PIMCO ETF Trust is currently generating about 1.06 per unit of volatility. If you would invest  10,003  in PIMCO ETF Trust on September 2, 2024 and sell it today you would earn a total of  121.00  from holding PIMCO ETF Trust or generate 1.21% return on investment over 90 days.

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

US Treasury 12  vs.  PIMCO ETF Trust

US Treasury 12

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 12 are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PIMCO ETF Trust

Risk-Adjusted Performance

83 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO ETF Trust are ranked lower than 83 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, PIMCO ETF is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with US Treasury and PIMCO ETF

The main advantage of trading using opposite US Treasury and PIMCO ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury 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 US Treasury 12 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 Anywhere module to track or share privately all of your investments from the convenience of any device.