Correlation Between Target Retirement and Pimco Short-term
Can any of the company-specific risk be diversified away by investing in both Target Retirement and Pimco Short-term 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 Target Retirement and Pimco Short-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Retirement 2040 and Pimco Short Term Fund, you can compare the effects of market volatilities on Target Retirement and Pimco Short-term 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 Target Retirement with a short position of Pimco Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and Pimco Short-term.
Diversification Opportunities for Target Retirement and Pimco Short-term
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Target and PIMCO is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2040 and Pimco Short Term Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Short Term and Target Retirement 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 Target Retirement 2040 are associated (or correlated) with Pimco Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Short Term has no effect on the direction of Target Retirement i.e., Target Retirement and Pimco Short-term go up and down completely randomly.
Pair Corralation between Target Retirement and Pimco Short-term
Assuming the 90 days horizon Target Retirement 2040 is expected to generate 5.15 times more return on investment than Pimco Short-term. However, Target Retirement is 5.15 times more volatile than Pimco Short Term Fund. It trades about 0.13 of its potential returns per unit of risk. Pimco Short Term Fund is currently generating about 0.18 per unit of risk. If you would invest 1,364 in Target Retirement 2040 on August 30, 2024 and sell it today you would earn a total of 20.00 from holding Target Retirement 2040 or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target Retirement 2040 vs. Pimco Short Term Fund
Performance |
| Timeline |
| Target Retirement 2040 |
| Pimco Short Term |
Target Retirement and Pimco Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Retirement and Pimco Short-term
The main advantage of trading using opposite Target Retirement and Pimco Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Retirement position performs unexpectedly, Pimco Short-term 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 Short-term will offset losses from the drop in Pimco Short-term's long position.| Target Retirement vs. Income Fund Income | Target Retirement vs. Usaa Nasdaq 100 | Target Retirement vs. Victory Diversified Stock | Target Retirement vs. Intermediate Term Bond Fund |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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