Correlation Between PIMCO Mortgage and IShares Trust

Can any of the company-specific risk be diversified away by investing in both PIMCO Mortgage and IShares Trust 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 Trust 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 Trust, you can compare the effects of market volatilities on PIMCO Mortgage and IShares Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Mortgage and IShares Trust.

Diversification Opportunities for PIMCO Mortgage and IShares Trust

0.02

Correlation Coefficient

PIMCO Mortgage  IShares Trust

Significant diversification

The 3 months correlation between PIMCO and IShares is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Mortgage Backed Securiti and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of PIMCO Mortgage i.e., PIMCO Mortgage and IShares Trust go up and down completely randomly.

Pair Corralation between PIMCO Mortgage and IShares Trust

Given the investment horizon of 90 days PIMCO Mortgage is expected to generate 3.38 times less return on investment than IShares Trust. But when comparing it to its historical volatility, PIMCO Mortgage Backed Securities is 1.41 times less risky than IShares Trust. It trades about 0.14 of its potential returns per unit of risk. iShares Trust is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  3,126  in iShares Trust on September 4, 2024 and sell it today you would earn a total of  120.00  from holding iShares Trust or generate 3.84% return on investment over 90 days.

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

PIMCO Mortgage Backed Securiti  vs.  iShares Trust

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PIMCO Mortgage and IShares Trust

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

The idea behind PIMCO Mortgage Backed Securities and iShares 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.