Correlation Between PIMCO ETFs and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both PIMCO ETFs and Leverage Shares 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 PIMCO ETFs and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PIMCO ETFs plc and Leverage Shares 3x, you can compare the effects of market volatilities on PIMCO ETFs and Leverage Shares 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 PIMCO ETFs with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO ETFs and Leverage Shares.
Diversification Opportunities for PIMCO ETFs and Leverage Shares
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between PIMCO and Leverage is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO ETFs plc and Leverage Shares 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 3x and PIMCO ETFs 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 PIMCO ETFs plc are associated (or correlated) with Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 3x has no effect on the direction of PIMCO ETFs i.e., PIMCO ETFs and Leverage Shares go up and down completely randomly.
Pair Corralation between PIMCO ETFs and Leverage Shares
Assuming the 90 days trading horizon PIMCO ETFs is expected to generate 77.74 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, PIMCO ETFs plc is 25.05 times less risky than Leverage Shares. It trades about 0.01 of its potential returns per unit of risk. Leverage Shares 3x is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 50,274 in Leverage Shares 3x on September 12, 2024 and sell it today you would lose (1,976) from holding Leverage Shares 3x or give up 3.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO ETFs plc vs. Leverage Shares 3x
Performance |
| Timeline |
| PIMCO ETFs plc |
| Leverage Shares 3x |
PIMCO ETFs and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO ETFs and Leverage Shares
The main advantage of trading using opposite PIMCO ETFs and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO ETFs position performs unexpectedly, Leverage Shares 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 Leverage Shares will offset losses from the drop in Leverage Shares' long position.| PIMCO ETFs vs. PIMCO Dollar Short | PIMCO ETFs vs. PIMCO Low Duration | PIMCO ETFs vs. PIMCO Short Term High | PIMCO ETFs vs. PIMCO Emerging Markets |
| Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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