Correlation Between IShares Conservative and PIMCO Monthly

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

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

Diversification Opportunities for IShares Conservative and PIMCO Monthly

0.84

Correlation Coefficient

IShares Conservative  PIMCO Monthly

Very poor diversification

The 3 months correlation between IShares and PIMCO is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Conservative Strategic and PIMCO Monthly Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Monthly Income and IShares Conservative 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 iShares Conservative Strategic are associated (or correlated) with PIMCO Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Monthly Income has no effect on the direction of IShares Conservative i.e., IShares Conservative and PIMCO Monthly go up and down completely randomly.

Pair Corralation between IShares Conservative and PIMCO Monthly

Assuming the 90 days trading horizon IShares Conservative is expected to generate 1.45 times less return on investment than PIMCO Monthly. In addition to that, IShares Conservative is 1.27 times more volatile than PIMCO Monthly Income. It trades about 0.05 of its total potential returns per unit of risk. PIMCO Monthly Income is currently generating about 0.08 per unit of volatility. If you would invest  1,601  in PIMCO Monthly Income on September 4, 2024 and sell it today you would earn a total of  212.00  from holding PIMCO Monthly Income or generate 13.24% return on investment over 90 days.

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

iShares Conservative Strategic  vs.  PIMCO Monthly Income

iShares Conservative

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Conservative Strategic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IShares Conservative is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PIMCO Monthly Income

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Monthly Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, PIMCO Monthly is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Conservative and PIMCO Monthly

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

The idea behind iShares Conservative Strategic and PIMCO Monthly Income 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.