Correlation Between PIMCO RAFI and Vanguard Mega
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and Vanguard Mega 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 Vanguard Mega 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 Vanguard Mega Cap, you can compare the effects of market volatilities on PIMCO RAFI and Vanguard Mega 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 Vanguard Mega. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Vanguard Mega.
Diversification Opportunities for PIMCO RAFI and Vanguard Mega
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PIMCO and Vanguard is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Vanguard Mega Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mega Cap 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 Vanguard Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mega Cap has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Vanguard Mega go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Vanguard Mega
Given the investment horizon of 90 days PIMCO RAFI is expected to generate 2.97 times less return on investment than Vanguard Mega. But when comparing it to its historical volatility, PIMCO RAFI Dynamic is 1.43 times less risky than Vanguard Mega. It trades about 0.07 of its potential returns per unit of risk. Vanguard Mega Cap is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 17,060 in Vanguard Mega Cap on September 12, 2024 and sell it today you would earn a total of 18,489 from holding Vanguard Mega Cap or generate 108.38% 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. Vanguard Mega Cap
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| Vanguard Mega Cap |
PIMCO RAFI and Vanguard Mega Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and Vanguard Mega
The main advantage of trading using opposite PIMCO RAFI and Vanguard Mega positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Vanguard Mega 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 Vanguard Mega will offset losses from the drop in Vanguard Mega's long position.| PIMCO RAFI vs. PIMCO RAFI Dynamic | PIMCO RAFI vs. PIMCO RAFI Dynamic | PIMCO RAFI vs. JPMorgan Diversified Return | PIMCO RAFI vs. JPMorgan Diversified Return |
| Vanguard Mega vs. iShares Factors Growth | Vanguard Mega vs. Absolute Core Strategy | Vanguard Mega vs. iShares ESG Advanced | Vanguard Mega vs. PIMCO RAFI Dynamic |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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