Correlation Between US Treasury and PIMCO ETF
Can any of the company-specific risk be diversified away by investing in both US Treasury and PIMCO ETF 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 US Treasury and PIMCO ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Treasury 12 and PIMCO ETF Trust, you can compare the effects of market volatilities on US Treasury and PIMCO ETF 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 US Treasury with a short position of PIMCO ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and PIMCO ETF.
Diversification Opportunities for US Treasury and PIMCO ETF
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between OBIL and PIMCO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 and PIMCO ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO ETF Trust and US Treasury 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 US Treasury 12 are associated (or correlated) with PIMCO ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO ETF Trust has no effect on the direction of US Treasury i.e., US Treasury and PIMCO ETF go up and down completely randomly.
Pair Corralation between US Treasury and PIMCO ETF
Given the investment horizon of 90 days US Treasury 12 is expected to generate 3.48 times more return on investment than PIMCO ETF. However, US Treasury is 3.48 times more volatile than PIMCO ETF Trust. It trades about 0.5 of its potential returns per unit of risk. PIMCO ETF Trust is currently generating about 1.49 per unit of risk. If you would invest 4,982 in US Treasury 12 on September 13, 2024 and sell it today you would earn a total of 22.00 from holding US Treasury 12 or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Treasury 12 vs. PIMCO ETF Trust
Performance |
| Timeline |
| US Treasury 12 |
| PIMCO ETF Trust |
US Treasury and PIMCO ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Treasury and PIMCO ETF
The main advantage of trading using opposite US Treasury and PIMCO ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury position performs unexpectedly, PIMCO ETF 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 ETF will offset losses from the drop in PIMCO ETF's long position.| US Treasury vs. Vanguard Intermediate Term Treasury | US Treasury vs. Vanguard Long Term Treasury | US Treasury vs. Vanguard Short Term Corporate | US Treasury vs. Vanguard Short Term Inflation Protected |
| PIMCO ETF vs. Global X Funds | PIMCO ETF vs. US Treasury 12 | PIMCO ETF vs. Tidal Trust II | PIMCO ETF vs. Franklin Liberty Treasury |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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