Correlation Between PIMCO RAFI and American Century
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and American Century 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 American Century 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 American Century STOXX, you can compare the effects of market volatilities on PIMCO RAFI and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and American Century.
Diversification Opportunities for PIMCO RAFI and American Century
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PIMCO and American is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and American Century STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century STOXX 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century STOXX has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and American Century go up and down completely randomly.
Pair Corralation between PIMCO RAFI and American Century
Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to under-perform the American Century. But the etf apears to be less risky and, when comparing its historical volatility, PIMCO RAFI Dynamic is 1.06 times less risky than American Century. The etf trades about -0.13 of its potential returns per unit of risk. The American Century STOXX is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 6,156 in American Century STOXX on August 27, 2024 and sell it today you would earn a total of 285.00 from holding American Century STOXX or generate 4.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. American Century STOXX
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| American Century STOXX |
PIMCO RAFI and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and American Century
The main advantage of trading using opposite PIMCO RAFI and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century'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 |
| American Century vs. American Century Quality | American Century vs. Invesco SP 500 | American Century vs. American Century Diversified | American Century vs. Invesco SP SmallCap |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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