Correlation Between Dow Jones and PIMCO Preferred
Can any of the company-specific risk be diversified away by investing in both Dow Jones and PIMCO Preferred 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 Preferred 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 Preferred And, you can compare the effects of market volatilities on Dow Jones and PIMCO Preferred 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 Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and PIMCO Preferred.
Diversification Opportunities for Dow Jones and PIMCO Preferred
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and PIMCO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and PIMCO Preferred And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Preferred And 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 Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Preferred And has no effect on the direction of Dow Jones i.e., Dow Jones and PIMCO Preferred go up and down completely randomly.
Pair Corralation between Dow Jones and PIMCO Preferred
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 4.39 times more return on investment than PIMCO Preferred. However, Dow Jones is 4.39 times more volatile than PIMCO Preferred And. It trades about 0.15 of its potential returns per unit of risk. PIMCO Preferred And is currently generating about 0.11 per unit of risk. If you would invest 4,124,052 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 305,599 from holding Dow Jones Industrial or generate 7.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. PIMCO Preferred And
Performance |
| Timeline |
Dow Jones and PIMCO Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
PIMCO Preferred And
Pair trading matchups for PIMCO Preferred
Pair Trading with Dow Jones and PIMCO Preferred
The main advantage of trading using opposite Dow Jones and PIMCO Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, PIMCO Preferred 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 Preferred will offset losses from the drop in PIMCO Preferred's long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| PIMCO Preferred vs. ETF Series Solutions | PIMCO Preferred vs. Aquagold International | PIMCO Preferred vs. Morningstar Unconstrained Allocation | PIMCO Preferred vs. High Yield Municipal Fund |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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