Correlation Between PIMCO 1 and FlexShares IBoxx
Can any of the company-specific risk be diversified away by investing in both PIMCO 1 and FlexShares IBoxx 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 FlexShares IBoxx 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 FlexShares iBoxx 3 Year, you can compare the effects of market volatilities on PIMCO 1 and FlexShares IBoxx 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 FlexShares IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO 1 and FlexShares IBoxx.
Diversification Opportunities for PIMCO 1 and FlexShares IBoxx
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PIMCO and FlexShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 1 5 Year and FlexShares iBoxx 3 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares iBoxx 3 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 FlexShares IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares iBoxx 3 has no effect on the direction of PIMCO 1 i.e., PIMCO 1 and FlexShares IBoxx go up and down completely randomly.
Pair Corralation between PIMCO 1 and FlexShares IBoxx
Given the investment horizon of 90 days PIMCO 1 5 Year is expected to generate 0.81 times more return on investment than FlexShares IBoxx. However, PIMCO 1 5 Year is 1.24 times less risky than FlexShares IBoxx. It trades about 0.06 of its potential returns per unit of risk. FlexShares iBoxx 3 Year is currently generating about 0.04 per unit of risk. If you would invest 5,004 in PIMCO 1 5 Year on January 26, 2024 and sell it today you would earn a total of 126.00 from holding PIMCO 1 5 Year or generate 2.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO 1 5 Year vs. FlexShares iBoxx 3 Year
Performance |
| Timeline |
| PIMCO 1 5 |
| FlexShares iBoxx 3 |
PIMCO 1 and FlexShares IBoxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO 1 and FlexShares IBoxx
The main advantage of trading using opposite PIMCO 1 and FlexShares IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO 1 position performs unexpectedly, FlexShares IBoxx 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 FlexShares IBoxx will offset losses from the drop in FlexShares IBoxx's long position.| PIMCO 1 vs. iShares iBoxx Investment | PIMCO 1 vs. iShares 1 3 Year | PIMCO 1 vs. iShares 7 10 Year | PIMCO 1 vs. iShares Core Aggregate |
| FlexShares IBoxx vs. iShares iBoxx Investment | FlexShares IBoxx vs. iShares 1 3 Year | FlexShares IBoxx vs. iShares 7 10 Year | FlexShares IBoxx vs. iShares Core Aggregate |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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