Correlation Between IShares Core and PIMCO Managed

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

By analyzing existing cross correlation between iShares Core SPTSX and PIMCO Managed Core, you can compare the effects of market volatilities on IShares Core and PIMCO Managed 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 IShares Core with a short position of PIMCO Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and PIMCO Managed.

Diversification Opportunities for IShares Core and PIMCO Managed

0.78

Correlation Coefficient

IShares Core  PIMCO Managed

Poor diversification

The 3 months correlation between IShares and PIMCO is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SPTSX and PIMCO Managed Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Managed Core and IShares Core 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 iShares Core SPTSX are associated (or correlated) with PIMCO Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Managed Core has no effect on the direction of IShares Core i.e., IShares Core and PIMCO Managed go up and down completely randomly.

Pair Corralation between IShares Core and PIMCO Managed

Assuming the 90 days trading horizon iShares Core SPTSX is expected to generate 1.07 times more return on investment than PIMCO Managed. However, IShares Core is 1.07 times more volatile than PIMCO Managed Core. It trades about 0.5 of its potential returns per unit of risk. PIMCO Managed Core is currently generating about 0.08 per unit of risk. If you would invest  3,807  in iShares Core SPTSX on April 21, 2025 and sell it today you would earn a total of  552.00  from holding iShares Core SPTSX or generate 14.5% return on investment over 90 days.

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

iShares Core SPTSX  vs.  PIMCO Managed Core

iShares Core SPTSX

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SPTSX are ranked lower than 39 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, IShares Core displayed solid returns over the last few months and may actually be approaching a breakup point.

PIMCO Managed Core

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Managed Core are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, PIMCO Managed is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and PIMCO Managed

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

The idea behind iShares Core SPTSX and PIMCO Managed Core 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.