Correlation Between Dimensional Core and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and PIMCO RAFI 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 Dimensional Core and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Core Equity and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on Dimensional Core and PIMCO RAFI 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 Dimensional Core with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and PIMCO RAFI.
Diversification Opportunities for Dimensional Core and PIMCO RAFI
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and PIMCO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and PIMCO RAFI Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO RAFI Dynamic and Dimensional 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 Dimensional Core Equity are associated (or correlated) with PIMCO RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO RAFI Dynamic has no effect on the direction of Dimensional Core i.e., Dimensional Core and PIMCO RAFI go up and down completely randomly.
Pair Corralation between Dimensional Core and PIMCO RAFI
Given the investment horizon of 90 days Dimensional Core is expected to generate 3.77 times less return on investment than PIMCO RAFI. But when comparing it to its historical volatility, Dimensional Core Equity is 1.04 times less risky than PIMCO RAFI. It trades about 0.12 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 2,984 in PIMCO RAFI Dynamic on November 18, 2024 and sell it today you would earn a total of 198.00 from holding PIMCO RAFI Dynamic or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Core Equity vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| Dimensional Core Equity |
| PIMCO RAFI Dynamic |
Dimensional Core and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Core and PIMCO RAFI
The main advantage of trading using opposite Dimensional Core and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, PIMCO RAFI 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 RAFI will offset losses from the drop in PIMCO RAFI's long position.| Dimensional Core vs. First Trust NASDAQ 100 | Dimensional Core vs. First Trust Multi | Dimensional Core vs. First Trust Large | Dimensional Core vs. First Trust Large |
| PIMCO RAFI vs. PIMCO RAFI Dynamic | PIMCO RAFI vs. PIMCO RAFI Dynamic | PIMCO RAFI vs. JPMorgan Diversified Return | PIMCO RAFI vs. JPMorgan Diversified Return |
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 Stocks Directory module to find actively traded stocks across global markets.
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