Correlation Between PIMCO RAFI and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and Sterling Capital 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 RAFI and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PIMCO RAFI Dynamic and Sterling Capital Focus, you can compare the effects of market volatilities on PIMCO RAFI and Sterling Capital 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 RAFI with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Sterling Capital.
Diversification Opportunities for PIMCO RAFI and Sterling Capital
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PIMCO and Sterling is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Sterling Capital Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Focus and PIMCO RAFI 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 RAFI Dynamic are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Focus has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Sterling Capital go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Sterling Capital
Given the investment horizon of 90 days PIMCO RAFI is expected to generate 1.49 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, PIMCO RAFI Dynamic is 1.63 times less risky than Sterling Capital. It trades about 0.06 of its potential returns per unit of risk. Sterling Capital Focus is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,654 in Sterling Capital Focus on August 27, 2024 and sell it today you would earn a total of 402.00 from holding Sterling Capital Focus or generate 15.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. Sterling Capital Focus
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| Sterling Capital Focus |
PIMCO RAFI and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and Sterling Capital
The main advantage of trading using opposite PIMCO RAFI and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.| PIMCO RAFI vs. Dimensional Core Equity | PIMCO RAFI vs. Dimensional Emerging Core | PIMCO RAFI vs. Dimensional Targeted Value | PIMCO RAFI vs. Dimensional Small Cap |
| Sterling Capital vs. Absolute Core Strategy | Sterling Capital vs. iShares ESG Advanced | Sterling Capital vs. PIMCO RAFI Dynamic | Sterling Capital vs. HCM Defender 100 |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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