Correlation Between PIMCO Mortgage and IShares IV

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

By analyzing existing cross correlation between PIMCO Mortgage Backed Securities and iShares IV Public, you can compare the effects of market volatilities on PIMCO Mortgage and IShares IV 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 Mortgage with a short position of IShares IV. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Mortgage and IShares IV.

Diversification Opportunities for PIMCO Mortgage and IShares IV

0.89

Correlation Coefficient

PIMCO Mortgage  IShares IV

Very poor diversification

The 3 months correlation between PIMCO and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Mortgage Backed Securiti and iShares IV Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares IV Public and PIMCO Mortgage 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 Mortgage Backed Securities are associated (or correlated) with IShares IV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares IV Public has no effect on the direction of PIMCO Mortgage i.e., PIMCO Mortgage and IShares IV go up and down completely randomly.

Pair Corralation between PIMCO Mortgage and IShares IV

Given the investment horizon of 90 days PIMCO Mortgage Backed Securities is expected to generate 0.51 times more return on investment than IShares IV. However, PIMCO Mortgage Backed Securities is 1.96 times less risky than IShares IV. It trades about -0.21 of its potential returns per unit of risk. iShares IV Public is currently generating about -0.13 per unit of risk. If you would invest  4,867  in PIMCO Mortgage Backed Securities on September 26, 2024 and sell it today you would lose (62.00) from holding PIMCO Mortgage Backed Securities or give up 1.27% of portfolio value over 90 days.

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

PIMCO Mortgage Backed Securiti  vs.  iShares IV Public

PIMCO Mortgage Backed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Mortgage Backed Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, PIMCO Mortgage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares IV Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares IV Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares IV is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PIMCO Mortgage and IShares IV

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

The idea behind PIMCO Mortgage Backed Securities and iShares IV Public 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.