Correlation Between PIMCO Investment and IShares ESG

Can any of the company-specific risk be diversified away by investing in both PIMCO Investment and IShares ESG 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 IShares ESG 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 iShares ESG USD, you can compare the effects of market volatilities on PIMCO Investment and IShares ESG 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 IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Investment and IShares ESG.

Diversification Opportunities for PIMCO Investment and IShares ESG

0.98

Correlation Coefficient

PIMCO Investment  IShares ESG

Almost no diversification

The 3 months correlation between PIMCO and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Investment Grade and iShares ESG USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG USD 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG USD has no effect on the direction of PIMCO Investment i.e., PIMCO Investment and IShares ESG go up and down completely randomly.

Pair Corralation between PIMCO Investment and IShares ESG

Given the investment horizon of 90 days PIMCO Investment Grade is expected to generate 1.52 times more return on investment than IShares ESG. However, PIMCO Investment is 1.52 times more volatile than iShares ESG USD. It trades about -0.14 of its potential returns per unit of risk. iShares ESG USD is currently generating about -0.21 per unit of risk. If you would invest  9,510  in PIMCO Investment Grade on January 29, 2024 and sell it today you would lose (158.00) from holding PIMCO Investment Grade or give up 1.66% 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.  iShares ESG USD

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 newest stock price agitation, may contribute to short-term losses for the retail investors.

iShares ESG USD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares ESG USD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares ESG is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PIMCO Investment and IShares ESG

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

The idea behind PIMCO Investment Grade and iShares ESG USD 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.