Correlation Between PIMCO 1 and Invesco SP

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Can any of the company-specific risk be diversified away by investing in both PIMCO 1 and Invesco SP 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 1 and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PIMCO 1 5 Year and Invesco SP 100, you can compare the effects of market volatilities on PIMCO 1 and Invesco SP 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 1 with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO 1 and Invesco SP.

Diversification Opportunities for PIMCO 1 and Invesco SP

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between PIMCO and Invesco is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 1-5 Year and Invesco SP 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 100 and PIMCO 1 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 1 5 Year are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 100 has no effect on the direction of PIMCO 1 i.e., PIMCO 1 and Invesco SP go up and down completely randomly.

Pair Corralation between PIMCO 1 and Invesco SP

Given the investment horizon of 90 days PIMCO 1 is expected to generate 15.24 times less return on investment than Invesco SP. But when comparing it to its historical volatility, PIMCO 1 5 Year is 3.7 times less risky than Invesco SP. It trades about 0.06 of its potential returns per unit of risk. Invesco SP 100 is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  8,880  in Invesco SP 100 on December 29, 2023 and sell it today you would earn a total of  574.00  from holding Invesco SP 100 or generate 6.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

PIMCO 1-5 Year  vs.  Invesco SP 100

 Performance 
       Timeline  
PIMCO 1-5 Year 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO 1 5 Year are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PIMCO 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Invesco SP 100 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 100 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in April 2024.

PIMCO 1 and Invesco SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PIMCO 1 and Invesco SP

The main advantage of trading using opposite PIMCO 1 and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO 1 position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP's long position.
The idea behind PIMCO 1 5 Year and Invesco SP 100 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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