Correlation Between Dimensional ETF and PIMCO Enhanced

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Can any of the company-specific risk be diversified away by investing in both Dimensional ETF and PIMCO Enhanced 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 Dimensional ETF and PIMCO Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional ETF Trust and PIMCO Enhanced Low, you can compare the effects of market volatilities on Dimensional ETF and PIMCO Enhanced 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 Dimensional ETF with a short position of PIMCO Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional ETF and PIMCO Enhanced.

Diversification Opportunities for Dimensional ETF and PIMCO Enhanced

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Dimensional and PIMCO is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and PIMCO Enhanced Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Enhanced Low and Dimensional ETF 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 Dimensional ETF Trust are associated (or correlated) with PIMCO Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Enhanced Low has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and PIMCO Enhanced go up and down completely randomly.

Pair Corralation between Dimensional ETF and PIMCO Enhanced

Given the investment horizon of 90 days Dimensional ETF Trust is expected to generate 1.44 times more return on investment than PIMCO Enhanced. However, Dimensional ETF is 1.44 times more volatile than PIMCO Enhanced Low. It trades about 0.13 of its potential returns per unit of risk. PIMCO Enhanced Low is currently generating about 0.12 per unit of risk. If you would invest  4,787  in Dimensional ETF Trust on August 28, 2024 and sell it today you would earn a total of  25.00  from holding Dimensional ETF Trust or generate 0.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Dimensional ETF Trust  vs.  PIMCO Enhanced Low

 Performance 
       Timeline  
Dimensional ETF Trust 

Risk-Adjusted Performance

3 of 100

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

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Enhanced Low are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, PIMCO Enhanced is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Dimensional ETF and PIMCO Enhanced Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dimensional ETF and PIMCO Enhanced

The main advantage of trading using opposite Dimensional ETF and PIMCO Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional ETF position performs unexpectedly, PIMCO Enhanced 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 Enhanced will offset losses from the drop in PIMCO Enhanced's long position.
The idea behind Dimensional ETF Trust and PIMCO Enhanced Low 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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