Correlation Between PIMCO RAFI and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and WisdomTree Europe 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 Europe 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 Europe Quality, you can compare the effects of market volatilities on PIMCO RAFI and WisdomTree Europe 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 Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and WisdomTree Europe.
Diversification Opportunities for PIMCO RAFI and WisdomTree Europe
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PIMCO and WisdomTree is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and WisdomTree Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Quality 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 Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Quality has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and WisdomTree Europe go up and down completely randomly.
Pair Corralation between PIMCO RAFI and WisdomTree Europe
Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to generate 1.0 times more return on investment than WisdomTree Europe. However, PIMCO RAFI Dynamic is 1.0 times less risky than WisdomTree Europe. It trades about -0.11 of its potential returns per unit of risk. WisdomTree Europe Quality is currently generating about -0.18 per unit of risk. If you would invest 2,012 in PIMCO RAFI Dynamic on September 4, 2024 and sell it today you would lose (45.00) from holding PIMCO RAFI Dynamic or give up 2.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. WisdomTree Europe Quality
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| WisdomTree Europe Quality |
PIMCO RAFI and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and WisdomTree Europe
The main advantage of trading using opposite PIMCO RAFI and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, WisdomTree Europe 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 Europe will offset losses from the drop in WisdomTree Europe'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 Europe vs. Vanguard FTSE Pacific | WisdomTree Europe vs. Vanguard FTSE Emerging | WisdomTree Europe vs. Vanguard FTSE All World | WisdomTree Europe vs. Vanguard FTSE Developed |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |