Correlation Between Pimco Foreign and Vanguard Total

Can any of the company-specific risk be diversified away by investing in both Pimco Foreign and Vanguard Total 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 Foreign and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pimco Foreign Bond and Vanguard Total International, you can compare the effects of market volatilities on Pimco Foreign and Vanguard Total 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 Foreign with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Foreign and Vanguard Total.

Diversification Opportunities for Pimco Foreign and Vanguard Total

0.81

Correlation Coefficient

Pimco Foreign  Vanguard Total

Very poor diversification

The 3 months correlation between Pimco and Vanguard is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Foreign Bond and Vanguard Total International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Inter and Pimco Foreign 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 Foreign Bond are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Inter has no effect on the direction of Pimco Foreign i.e., Pimco Foreign and Vanguard Total go up and down completely randomly.

Pair Corralation between Pimco Foreign and Vanguard Total

Assuming the 90 days horizon Pimco Foreign is expected to generate 2.03 times less return on investment than Vanguard Total. In addition to that, Pimco Foreign is 1.06 times more volatile than Vanguard Total International. It trades about 0.05 of its total potential returns per unit of risk. Vanguard Total International is currently generating about 0.12 per unit of volatility. If you would invest  1,995  in Vanguard Total International on September 12, 2024 and sell it today you would earn a total of  29.00  from holding Vanguard Total International or generate 1.45% return on investment over 90 days.

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

Pimco Foreign Bond  vs.  Vanguard Total International

Pimco Foreign Bond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Foreign Bond are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Foreign is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Total Inter

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Vanguard Total 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 Foreign and Vanguard Total

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

The idea behind Pimco Foreign Bond and Vanguard Total International 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.