Correlation Between Vanguard Value and PIMCO ETF

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Can any of the company-specific risk be diversified away by investing in both Vanguard Value 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 Value 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 Value Index and PIMCO ETF Trust, you can compare the effects of market volatilities on Vanguard Value 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 Value with a short position of PIMCO ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and PIMCO ETF.

Diversification Opportunities for Vanguard Value and PIMCO ETF

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Vanguard and PIMCO is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index 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 Value 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 Value Index 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 Value i.e., Vanguard Value and PIMCO ETF go up and down completely randomly.

Pair Corralation between Vanguard Value and PIMCO ETF

Considering the 90-day investment horizon Vanguard Value Index is expected to under-perform the PIMCO ETF. In addition to that, Vanguard Value is 42.83 times more volatile than PIMCO ETF Trust. It trades about -0.18 of its total potential returns per unit of risk. PIMCO ETF Trust is currently generating about 1.39 per unit of volatility. If you would invest  10,058  in PIMCO ETF Trust on September 12, 2024 and sell it today you would earn a total of  38.00  from holding PIMCO ETF Trust or generate 0.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Vanguard Value Index  vs.  PIMCO ETF Trust

 Performance 
       Timeline  
Vanguard Value Index 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
PIMCO ETF Trust 

Risk-Adjusted Performance

86 of 100

 
Weak
 
Strong
Market Crasher
Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO ETF Trust are ranked lower than 86 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, PIMCO ETF is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Value and PIMCO ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Value and PIMCO ETF

The main advantage of trading using opposite Vanguard Value and PIMCO ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value 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.
The idea behind Vanguard Value Index and PIMCO ETF Trust 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.
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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