Correlation Between Vanguard Extended and Pimco Long-term

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

By analyzing existing cross correlation between Vanguard Extended Duration and Pimco Long Term Credit, you can compare the effects of market volatilities on Vanguard Extended and Pimco Long-term 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 Vanguard Extended with a short position of Pimco Long-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Pimco Long-term.

Diversification Opportunities for Vanguard Extended and Pimco Long-term

0.96

Correlation Coefficient

Vanguard Extended  Pimco Long-term

Almost no diversification

The 3 months correlation between Vanguard and Pimco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Duration and Pimco Long Term Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Long Term and Vanguard Extended 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 Vanguard Extended Duration are associated (or correlated) with Pimco Long-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Long Term has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Pimco Long-term go up and down completely randomly.

Pair Corralation between Vanguard Extended and Pimco Long-term

Assuming the 90 days horizon Vanguard Extended Duration is expected to under-perform the Pimco Long-term. In addition to that, Vanguard Extended is 2.11 times more volatile than Pimco Long Term Credit. It trades about -0.04 of its total potential returns per unit of risk. Pimco Long Term Credit is currently generating about -0.01 per unit of volatility. If you would invest  908.00  in Pimco Long Term Credit on August 30, 2024 and sell it today you would lose (5.00) from holding Pimco Long Term Credit or give up 0.55% of portfolio value over 90 days.

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

Vanguard Extended Duration  vs.  Pimco Long Term Credit

Vanguard Extended

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Extended Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Extended is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Long Term Credit has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Pimco Long-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Extended and Pimco Long-term

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

The idea behind Vanguard Extended Duration and Pimco Long Term Credit 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.