Correlation Between PIMCO RAFI and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and Vanguard Total 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 Total 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 Total World, you can compare the effects of market volatilities on PIMCO RAFI and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Vanguard Total.
Diversification Opportunities for PIMCO RAFI and Vanguard Total
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between PIMCO and Vanguard is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Vanguard Total World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total World 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total World has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Vanguard Total go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Vanguard Total
Given the investment horizon of 90 days PIMCO RAFI is expected to generate 5.6 times less return on investment than Vanguard Total. In addition to that, PIMCO RAFI is 1.27 times more volatile than Vanguard Total World. It trades about 0.04 of its total potential returns per unit of risk. Vanguard Total World is currently generating about 0.31 per unit of volatility. If you would invest 11,750 in Vanguard Total World on September 4, 2024 and sell it today you would earn a total of 470.00 from holding Vanguard Total World or generate 4.0% 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. Vanguard Total World
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| Vanguard Total World |
PIMCO RAFI and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and Vanguard Total
The main advantage of trading using opposite PIMCO RAFI and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total'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 Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard FTSE Emerging |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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