Correlation Between Matthews Emerging and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both Matthews Emerging 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 Matthews Emerging and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews Emerging Markets and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on Matthews Emerging 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 Matthews Emerging with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Emerging and PIMCO RAFI.
Diversification Opportunities for Matthews Emerging and PIMCO RAFI
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Matthews and PIMCO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Emerging Markets 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 Matthews Emerging 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 Matthews Emerging Markets 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 Matthews Emerging i.e., Matthews Emerging and PIMCO RAFI go up and down completely randomly.
Pair Corralation between Matthews Emerging and PIMCO RAFI
Given the investment horizon of 90 days Matthews Emerging Markets is expected to generate 0.88 times more return on investment than PIMCO RAFI. However, Matthews Emerging Markets is 1.14 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 -0.04 per unit of risk. If you would invest 3,047 in Matthews Emerging Markets on September 12, 2024 and sell it today you would lose (57.00) from holding Matthews Emerging Markets or give up 1.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews Emerging Markets vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| Matthews Emerging Markets |
| PIMCO RAFI Dynamic |
Matthews Emerging and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews Emerging and PIMCO RAFI
The main advantage of trading using opposite Matthews Emerging and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews Emerging 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.| Matthews Emerging vs. Matthews Asia Innovators | Matthews Emerging vs. Columbia EM Core | Matthews Emerging vs. MAYBANK EMERGING ETF | Matthews Emerging vs. Matthews China Active |
| 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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