Correlation Between SPDR MSCI and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and PIMCO RAFI 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 SPDR MSCI and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI USA and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on SPDR MSCI and PIMCO RAFI 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 SPDR MSCI with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and PIMCO RAFI.
Diversification Opportunities for SPDR MSCI and PIMCO RAFI
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPDR and PIMCO is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI USA and PIMCO RAFI Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO RAFI Dynamic and SPDR MSCI 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 SPDR MSCI USA are associated (or correlated) with PIMCO RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO RAFI Dynamic has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and PIMCO RAFI go up and down completely randomly.
Pair Corralation between SPDR MSCI and PIMCO RAFI
Considering the 90-day investment horizon SPDR MSCI USA is expected to generate 0.93 times more return on investment than PIMCO RAFI. However, SPDR MSCI USA is 1.08 times less risky than PIMCO RAFI. It trades about 0.35 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.04 per unit of risk. If you would invest 15,556 in SPDR MSCI USA on September 1, 2024 and sell it today you would earn a total of 823.00 from holding SPDR MSCI USA or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI USA vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| SPDR MSCI USA |
| PIMCO RAFI Dynamic |
SPDR MSCI and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and PIMCO RAFI
The main advantage of trading using opposite SPDR MSCI and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, PIMCO RAFI 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 PIMCO RAFI will offset losses from the drop in PIMCO RAFI's long position.| SPDR MSCI vs. SPDR SSGA Large | SPDR MSCI vs. SPDR MSCI EAFE | SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. SPDR Russell 1000 |
| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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