Correlation Between Dow Jones and PIMCO ETF
Can any of the company-specific risk be diversified away by investing in both Dow Jones and PIMCO ETF 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 Dow Jones and PIMCO ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and PIMCO ETF Trust, you can compare the effects of market volatilities on Dow Jones and PIMCO ETF 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 Dow Jones with a short position of PIMCO ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and PIMCO ETF.
Diversification Opportunities for Dow Jones and PIMCO ETF
Significant diversification
The 3 months correlation between Dow and PIMCO is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and PIMCO ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO ETF Trust and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with PIMCO ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO ETF Trust has no effect on the direction of Dow Jones i.e., Dow Jones and PIMCO ETF go up and down completely randomly.
Pair Corralation between Dow Jones and PIMCO ETF
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.46 times more return on investment than PIMCO ETF. However, Dow Jones is 2.46 times more volatile than PIMCO ETF Trust. It trades about 0.17 of its potential returns per unit of risk. PIMCO ETF Trust is currently generating about -0.03 per unit of risk. If you would invest 4,233,015 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 253,016 from holding Dow Jones Industrial or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. PIMCO ETF Trust
Performance |
| Timeline |
Dow Jones and PIMCO ETF Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
PIMCO ETF Trust
Pair trading matchups for PIMCO ETF
Pair Trading with Dow Jones and PIMCO ETF
The main advantage of trading using opposite Dow Jones and PIMCO ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, PIMCO ETF 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 ETF will offset losses from the drop in PIMCO ETF's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| PIMCO ETF vs. BlackRock Intermediate Muni | PIMCO ETF vs. SSGA Active Trust | PIMCO ETF vs. SSGA Active Trust | PIMCO ETF vs. SPDR Nuveen Municipal |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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