Correlation Between Vanguard Tax and PIMCO ETF
Can any of the company-specific risk be diversified away by investing in both Vanguard Tax 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 Vanguard Tax and PIMCO ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Tax Exempt Bond and PIMCO ETF Trust, you can compare the effects of market volatilities on Vanguard Tax 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 Vanguard Tax with a short position of PIMCO ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Tax and PIMCO ETF.
Diversification Opportunities for Vanguard Tax and PIMCO ETF
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and PIMCO is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Tax Exempt Bond 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 Vanguard Tax 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 Vanguard Tax Exempt Bond 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 Vanguard Tax i.e., Vanguard Tax and PIMCO ETF go up and down completely randomly.
Pair Corralation between Vanguard Tax and PIMCO ETF
Given the investment horizon of 90 days Vanguard Tax is expected to generate 1.43 times less return on investment than PIMCO ETF. But when comparing it to its historical volatility, Vanguard Tax Exempt Bond is 1.06 times less risky than PIMCO ETF. It trades about 0.07 of its potential returns per unit of risk. PIMCO ETF Trust is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,281 in PIMCO ETF Trust on August 25, 2024 and sell it today you would earn a total of 274.00 from holding PIMCO ETF Trust or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Tax Exempt Bond vs. PIMCO ETF Trust
Performance |
| Timeline |
| Vanguard Tax Exempt |
| PIMCO ETF Trust |
Vanguard Tax and PIMCO ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Tax and PIMCO ETF
The main advantage of trading using opposite Vanguard Tax and PIMCO ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Tax 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.| Vanguard Tax vs. iShares National Muni | Vanguard Tax vs. Vanguard Short Term Inflation Protected | Vanguard Tax vs. Vanguard Intermediate Term Corporate | Vanguard Tax vs. Vanguard Short Term Treasury |
| PIMCO ETF vs. BlackRock Intermediate Muni | PIMCO ETF vs. IQ MacKay Municipal | PIMCO ETF vs. PIMCO Short Term | PIMCO ETF vs. iShares Short Maturity |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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