Correlation Between Vanguard and PIMCO Euro
Can any of the company-specific risk be diversified away by investing in both Vanguard and PIMCO Euro 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 and PIMCO Euro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and PIMCO Euro Short Term, you can compare the effects of market volatilities on Vanguard and PIMCO Euro 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 with a short position of PIMCO Euro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and PIMCO Euro.
Diversification Opportunities for Vanguard and PIMCO Euro
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and PIMCO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and PIMCO Euro Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Euro Short and Vanguard 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 SP 500 are associated (or correlated) with PIMCO Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Euro Short has no effect on the direction of Vanguard i.e., Vanguard and PIMCO Euro go up and down completely randomly.
Pair Corralation between Vanguard and PIMCO Euro
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 10.57 times more return on investment than PIMCO Euro. However, Vanguard is 10.57 times more volatile than PIMCO Euro Short Term. It trades about 0.35 of its potential returns per unit of risk. PIMCO Euro Short Term is currently generating about 0.5 per unit of risk. If you would invest 9,379 in Vanguard SP 500 on September 5, 2024 and sell it today you would earn a total of 781.00 from holding Vanguard SP 500 or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard SP 500 vs. PIMCO Euro Short Term
Performance |
| Timeline |
| Vanguard SP 500 |
| PIMCO Euro Short |
Vanguard and PIMCO Euro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and PIMCO Euro
The main advantage of trading using opposite Vanguard and PIMCO Euro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, PIMCO Euro 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 Euro will offset losses from the drop in PIMCO Euro's long position.| Vanguard vs. Vanguard FTSE Emerging | Vanguard vs. Vanguard USD Emerging | Vanguard vs. Vanguard FTSE Developed | Vanguard vs. Vanguard FTSE Japan |
| PIMCO Euro vs. Vanguard SP 500 | PIMCO Euro vs. iShares Core SP | PIMCO Euro vs. Lyxor Japan UCITS | PIMCO Euro vs. iShares Core MSCI |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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