Correlation Between SPDR Barclays and PIMCO Investment

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

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

Diversification Opportunities for SPDR Barclays and PIMCO Investment

0.77

Correlation Coefficient

SPDR Barclays  PIMCO Investment

Poor diversification

The 3 months correlation between SPDR and PIMCO is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Intermediate and PIMCO Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Investment Grade and SPDR Barclays 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 SPDR Barclays Intermediate are associated (or correlated) with PIMCO Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Investment Grade has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and PIMCO Investment go up and down completely randomly.

Pair Corralation between SPDR Barclays and PIMCO Investment

Given the investment horizon of 90 days SPDR Barclays Intermediate is expected to generate 0.52 times more return on investment than PIMCO Investment. However, SPDR Barclays Intermediate is 1.91 times less risky than PIMCO Investment. It trades about -0.04 of its potential returns per unit of risk. PIMCO Investment Grade is currently generating about -0.06 per unit of risk. If you would invest  3,223  in SPDR Barclays Intermediate on January 27, 2024 and sell it today you would lose (13.00) from holding SPDR Barclays Intermediate or give up 0.4% of portfolio value over 90 days.

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

SPDR Barclays Intermediate  vs.  PIMCO Investment Grade

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.

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.

Pair Trading with SPDR Barclays and PIMCO Investment

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

The idea behind SPDR Barclays Intermediate and PIMCO Investment Grade 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.