Correlation Between Investment Grade and Pimco International
Can any of the company-specific risk be diversified away by investing in both Investment Grade and Pimco International 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 Investment Grade and Pimco International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investment Grade Porate and Pimco International Stocksplus, you can compare the effects of market volatilities on Investment Grade and Pimco International 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 Investment Grade with a short position of Pimco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Grade and Pimco International.
Diversification Opportunities for Investment Grade and Pimco International
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Investment and Pimco is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Investment Grade Porate and Pimco International Stocksplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco International and Investment Grade 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 Investment Grade Porate are associated (or correlated) with Pimco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco International has no effect on the direction of Investment Grade i.e., Investment Grade and Pimco International go up and down completely randomly.
Pair Corralation between Investment Grade and Pimco International
Assuming the 90 days horizon Investment Grade Porate is expected to generate 0.61 times more return on investment than Pimco International. However, Investment Grade Porate is 1.63 times less risky than Pimco International. It trades about 0.05 of its potential returns per unit of risk. Pimco International Stocksplus is currently generating about -0.07 per unit of risk. If you would invest 898.00 in Investment Grade Porate on August 29, 2024 and sell it today you would earn a total of 4.00 from holding Investment Grade Porate or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investment Grade Porate vs. Pimco International Stocksplus
Performance |
| Timeline |
| Investment Grade Porate |
| Pimco International |
Investment Grade and Pimco International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment Grade and Pimco International
The main advantage of trading using opposite Investment Grade and Pimco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Grade position performs unexpectedly, Pimco International 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 International will offset losses from the drop in Pimco International's long position.| Investment Grade vs. Pace High Yield | Investment Grade vs. Lord Abbett High | Investment Grade vs. Dunham High Yield | Investment Grade vs. Msift High Yield |
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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