Correlation Between Vanguard Intermediate-ter and Pimco Investment

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

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

Diversification Opportunities for Vanguard Intermediate-ter and Pimco Investment

1.0

Correlation Coefficient

Vanguard Intermediate-ter  Pimco Investment

No risk reduction

The 3 months correlation between Vanguard and Pimco is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Inv and Pimco Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Investment Grade and Vanguard Intermediate-ter 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 Intermediate Term Investment Grade are associated (or correlated) with Pimco Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Investment Grade has no effect on the direction of Vanguard Intermediate-ter i.e., Vanguard Intermediate-ter and Pimco Investment go up and down completely randomly.

Pair Corralation between Vanguard Intermediate-ter and Pimco Investment

Assuming the 90 days horizon Vanguard Intermediate Term Investment Grade is expected to under-perform the Pimco Investment. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Intermediate Term Investment Grade is 1.04 times less risky than Pimco Investment. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Pimco Investment Grade is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  910.00  in Pimco Investment Grade on September 2, 2024 and sell it today you would lose (2.00) from holding Pimco Investment Grade or give up 0.22% of portfolio value over 90 days.

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

Vanguard Intermediate Term Inv  vs.  Pimco Investment Grade

Vanguard Intermediate-ter

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pimco Investment Grade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Investment Grade has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pimco Investment 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 Intermediate-ter and Pimco Investment

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

The idea behind Vanguard Intermediate Term Investment Grade and Pimco Investment Grade 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.