Correlation Between WisdomTree International and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both WisdomTree International 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 WisdomTree International and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree International Multifactor and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on WisdomTree International 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 WisdomTree International with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and PIMCO RAFI.
Diversification Opportunities for WisdomTree International and PIMCO RAFI
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WisdomTree and PIMCO is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Multi 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 WisdomTree International 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 WisdomTree International Multifactor 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 WisdomTree International i.e., WisdomTree International and PIMCO RAFI go up and down completely randomly.
Pair Corralation between WisdomTree International and PIMCO RAFI
Given the investment horizon of 90 days WisdomTree International Multifactor is expected to generate 0.6 times more return on investment than PIMCO RAFI. However, WisdomTree International Multifactor is 1.67 times less risky than PIMCO RAFI. It trades about 0.04 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about -0.11 per unit of risk. If you would invest 2,728 in WisdomTree International Multifactor on September 4, 2024 and sell it today you would earn a total of 13.00 from holding WisdomTree International Multifactor or generate 0.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Multi vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| WisdomTree International |
| PIMCO RAFI Dynamic |
WisdomTree International and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and PIMCO RAFI
The main advantage of trading using opposite WisdomTree International and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International 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.| WisdomTree International vs. iShares MSCI EAFE | WisdomTree International vs. Vanguard International High | WisdomTree International vs. iShares International Select |
| 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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