Correlation Between PIMCO RAFI and WisdomTree Corporate
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and WisdomTree Corporate 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 WisdomTree Corporate 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 WisdomTree Corporate Bond, you can compare the effects of market volatilities on PIMCO RAFI and WisdomTree Corporate 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 WisdomTree Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and WisdomTree Corporate.
Diversification Opportunities for PIMCO RAFI and WisdomTree Corporate
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PIMCO and WisdomTree is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and WisdomTree Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Corporate Bond 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 WisdomTree Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Corporate Bond has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and WisdomTree Corporate go up and down completely randomly.
Pair Corralation between PIMCO RAFI and WisdomTree Corporate
Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to generate 1.82 times more return on investment than WisdomTree Corporate. However, PIMCO RAFI is 1.82 times more volatile than WisdomTree Corporate Bond. It trades about 0.05 of its potential returns per unit of risk. WisdomTree Corporate Bond is currently generating about 0.05 per unit of risk. If you would invest 2,580 in PIMCO RAFI Dynamic on November 2, 2024 and sell it today you would earn a total of 491.95 from holding PIMCO RAFI Dynamic or generate 19.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.3% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. WisdomTree Corporate Bond
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| WisdomTree Corporate Bond |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
PIMCO RAFI and WisdomTree Corporate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and WisdomTree Corporate
The main advantage of trading using opposite PIMCO RAFI and WisdomTree Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, WisdomTree Corporate 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 WisdomTree Corporate will offset losses from the drop in WisdomTree Corporate'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 |
| WisdomTree Corporate vs. WisdomTree Yield Enhanced | WisdomTree Corporate vs. iShares Edge Investment | WisdomTree Corporate vs. FlexShares Credit Scored Long |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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