Correlation Between PIMCO Investment and SPDR Barclays

Can any of the company-specific risk be diversified away by investing in both PIMCO Investment and SPDR Barclays 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 PIMCO Investment and SPDR Barclays into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PIMCO Investment Grade and SPDR Barclays Intermediate, you can compare the effects of market volatilities on PIMCO Investment and SPDR Barclays 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 PIMCO Investment with a short position of SPDR Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Investment and SPDR Barclays.

Diversification Opportunities for PIMCO Investment and SPDR Barclays

0.93

Correlation Coefficient

PIMCO Investment  SPDR Barclays

Almost no diversification

The 3 months correlation between PIMCO and SPDR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Investment Grade and SPDR Barclays Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Interm and PIMCO Investment 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 PIMCO Investment Grade are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Interm has no effect on the direction of PIMCO Investment i.e., PIMCO Investment and SPDR Barclays go up and down completely randomly.

Pair Corralation between PIMCO Investment and SPDR Barclays

Given the investment horizon of 90 days PIMCO Investment Grade is expected to under-perform the SPDR Barclays. In addition to that, PIMCO Investment is 1.91 times more volatile than SPDR Barclays Intermediate. It trades about -0.17 of its total potential returns per unit of risk. SPDR Barclays Intermediate is currently generating about -0.22 per unit of volatility. If you would invest  3,248  in SPDR Barclays Intermediate on January 20, 2024 and sell it today you would lose (42.00) from holding SPDR Barclays Intermediate or give up 1.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

PIMCO Investment Grade  vs.  SPDR Barclays Intermediate

PIMCO Investment Grade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Investment Grade has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PIMCO Investment is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

SPDR Barclays Interm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, SPDR Barclays is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PIMCO Investment and SPDR Barclays

The main advantage of trading using opposite PIMCO Investment and SPDR Barclays positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO Investment position performs unexpectedly, SPDR Barclays 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 SPDR Barclays will offset losses from the drop in SPDR Barclays' long position.

The idea behind PIMCO Investment Grade and SPDR Barclays Intermediate 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.