Correlation Between PIMCO Euro and Vanguard
Can any of the company-specific risk be diversified away by investing in both PIMCO Euro and Vanguard 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 Euro and Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PIMCO Euro Short Term and Vanguard SP 500, you can compare the effects of market volatilities on PIMCO Euro and Vanguard 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 Euro with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Euro and Vanguard.
Diversification Opportunities for PIMCO Euro and Vanguard
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PIMCO and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Euro Short Term and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and PIMCO Euro 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 Euro Short Term are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of PIMCO Euro i.e., PIMCO Euro and Vanguard go up and down completely randomly.
Pair Corralation between PIMCO Euro and Vanguard
Assuming the 90 days trading horizon PIMCO Euro is expected to generate 7.68 times less return on investment than Vanguard. But when comparing it to its historical volatility, PIMCO Euro Short Term is 10.55 times less risky than Vanguard. It trades about 0.5 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 9,379 in Vanguard SP 500 on September 5, 2024 and sell it today you would earn a total of 803.00 from holding Vanguard SP 500 or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
PIMCO Euro Short Term vs. Vanguard SP 500
Performance |
| Timeline |
| PIMCO Euro Short |
| Vanguard SP 500 |
PIMCO Euro and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO Euro and Vanguard
The main advantage of trading using opposite PIMCO Euro and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO Euro position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard's long position.| PIMCO Euro vs. Vanguard SP 500 | PIMCO Euro vs. iShares Core SP | PIMCO Euro vs. Lyxor Japan UCITS | PIMCO Euro vs. iShares SP 500 |
| Vanguard vs. Vanguard FTSE Emerging | Vanguard vs. Vanguard USD Emerging | Vanguard vs. Vanguard FTSE Developed | Vanguard vs. Vanguard FTSE Japan |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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