Correlation Between PIMCO RAFI and Affinity World
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and Affinity World 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 Affinity World 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 Affinity World Leaders, you can compare the effects of market volatilities on PIMCO RAFI and Affinity World 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 Affinity World. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Affinity World.
Diversification Opportunities for PIMCO RAFI and Affinity World
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PIMCO and Affinity is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Affinity World Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity World Leaders 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 Affinity World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity World Leaders has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Affinity World go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Affinity World
Given the investment horizon of 90 days PIMCO RAFI is expected to generate 1.63 times less return on investment than Affinity World. But when comparing it to its historical volatility, PIMCO RAFI Dynamic is 1.39 times less risky than Affinity World. It trades about 0.11 of its potential returns per unit of risk. Affinity World Leaders is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,000 in Affinity World Leaders on October 22, 2024 and sell it today you would earn a total of 53.00 from holding Affinity World Leaders or generate 1.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. Affinity World Leaders
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| Affinity World Leaders |
PIMCO RAFI and Affinity World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and Affinity World
The main advantage of trading using opposite PIMCO RAFI and Affinity World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Affinity World 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 Affinity World will offset losses from the drop in Affinity World'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 |
| Affinity World vs. American Century STOXX | Affinity World vs. PIMCO RAFI Dynamic | Affinity World vs. ProShares SP 500 |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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