Correlation Between PIMCO RAFI and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and SPDR MSCI 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 SPDR MSCI 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 SPDR MSCI USA, you can compare the effects of market volatilities on PIMCO RAFI and SPDR MSCI 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 SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and SPDR MSCI.
Diversification Opportunities for PIMCO RAFI and SPDR MSCI
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between PIMCO and SPDR is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and SPDR MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI USA 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI USA has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and SPDR MSCI go up and down completely randomly.
Pair Corralation between PIMCO RAFI and SPDR MSCI
Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to generate 1.07 times more return on investment than SPDR MSCI. However, PIMCO RAFI is 1.07 times more volatile than SPDR MSCI USA. It trades about 0.36 of its potential returns per unit of risk. SPDR MSCI USA is currently generating about 0.35 per unit of risk. If you would invest 4,965 in PIMCO RAFI Dynamic on September 1, 2024 and sell it today you would earn a total of 290.00 from holding PIMCO RAFI Dynamic or generate 5.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. SPDR MSCI USA
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| SPDR MSCI USA |
PIMCO RAFI and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and SPDR MSCI
The main advantage of trading using opposite PIMCO RAFI and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, SPDR MSCI 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 SPDR MSCI will offset losses from the drop in SPDR MSCI'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 |
| SPDR MSCI vs. SPDR SSGA Large | SPDR MSCI vs. SPDR MSCI EAFE | SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. SPDR Russell 1000 |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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