Correlation Between PIMCO RAFI and Freedom Day
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and Freedom Day 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 Freedom Day 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 Freedom Day Dividend, you can compare the effects of market volatilities on PIMCO RAFI and Freedom Day 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 Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Freedom Day.
Diversification Opportunities for PIMCO RAFI and Freedom Day
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PIMCO and Freedom is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend 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 Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Freedom Day go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Freedom Day
Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to under-perform the Freedom Day. In addition to that, PIMCO RAFI is 1.02 times more volatile than Freedom Day Dividend. It trades about -0.14 of its total potential returns per unit of risk. Freedom Day Dividend is currently generating about 0.31 per unit of volatility. If you would invest 3,293 in Freedom Day Dividend on October 23, 2024 and sell it today you would earn a total of 138.00 from holding Freedom Day Dividend or generate 4.19% 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. Freedom Day Dividend
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| Freedom Day Dividend |
PIMCO RAFI and Freedom Day Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and Freedom Day
The main advantage of trading using opposite PIMCO RAFI and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Freedom Day 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 Freedom Day will offset losses from the drop in Freedom Day'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 |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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