Correlation Between Ford and PIMCO Preferred
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and PIMCO Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and PIMCO Preferred And, you can compare the effects of market volatilities on Ford 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 Ford with a short position of PIMCO Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and PIMCO Preferred.
Diversification Opportunities for Ford and PIMCO Preferred
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and PIMCO is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and PIMCO Preferred go up and down completely randomly.
Pair Corralation between Ford and PIMCO Preferred
Taking into account the 90-day investment horizon Ford Motor is expected to generate 9.34 times more return on investment than PIMCO Preferred. However, Ford is 9.34 times more volatile than PIMCO Preferred And. It trades about 0.19 of its potential returns per unit of risk. PIMCO Preferred And is currently generating about 0.16 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. PIMCO Preferred And
Performance |
| Timeline |
| Ford Motor |
| PIMCO Preferred And |
Ford and PIMCO Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and PIMCO Preferred
The main advantage of trading using opposite Ford and PIMCO Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and PIMCO Preferred And 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.| PIMCO Preferred vs. iShares Preferred and | PIMCO Preferred vs. First Trust Preferred | PIMCO Preferred vs. Global X Preferred | PIMCO Preferred vs. Invesco Variable Rate |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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