Correlation Between HP and PIMCO Intermediate
Can any of the company-specific risk be diversified away by investing in both HP and PIMCO Intermediate 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 HP and PIMCO Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and PIMCO Intermediate Municipal, you can compare the effects of market volatilities on HP and PIMCO Intermediate 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 HP with a short position of PIMCO Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and PIMCO Intermediate.
Diversification Opportunities for HP and PIMCO Intermediate
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HP and PIMCO is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and PIMCO Intermediate Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Intermediate and HP 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 HP Inc are associated (or correlated) with PIMCO Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Intermediate has no effect on the direction of HP i.e., HP and PIMCO Intermediate go up and down completely randomly.
Pair Corralation between HP and PIMCO Intermediate
Considering the 90-day investment horizon HP Inc is expected to generate 5.08 times more return on investment than PIMCO Intermediate. However, HP is 5.08 times more volatile than PIMCO Intermediate Municipal. It trades about 0.14 of its potential returns per unit of risk. PIMCO Intermediate Municipal is currently generating about 0.12 per unit of risk. If you would invest 3,742 in HP Inc on August 27, 2024 and sell it today you would earn a total of 188.00 from holding HP Inc or generate 5.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. PIMCO Intermediate Municipal
Performance |
| Timeline |
| HP Inc |
| PIMCO Intermediate |
HP and PIMCO Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and PIMCO Intermediate
The main advantage of trading using opposite HP and PIMCO Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, PIMCO Intermediate 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 Intermediate will offset losses from the drop in PIMCO Intermediate's long position.The idea behind HP Inc and PIMCO Intermediate Municipal 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 Intermediate vs. SSGA Active Trust | PIMCO Intermediate vs. SPDR MarketAxess Investment | PIMCO Intermediate vs. SSGA Active Trust |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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