Correlation Between Xtrackers and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both Xtrackers 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 Xtrackers and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers SP 500 and PIMCO RAFI ESG, you can compare the effects of market volatilities on Xtrackers 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 Xtrackers with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and PIMCO RAFI.
Diversification Opportunities for Xtrackers and PIMCO RAFI
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Xtrackers and PIMCO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers SP 500 and PIMCO RAFI ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO RAFI ESG and Xtrackers 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 Xtrackers SP 500 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 ESG has no effect on the direction of Xtrackers i.e., Xtrackers and PIMCO RAFI go up and down completely randomly.
Pair Corralation between Xtrackers and PIMCO RAFI
Given the investment horizon of 90 days Xtrackers SP 500 is expected to under-perform the PIMCO RAFI. In addition to that, Xtrackers is 1.26 times more volatile than PIMCO RAFI ESG. It trades about -0.02 of its total potential returns per unit of risk. PIMCO RAFI ESG is currently generating about 0.0 per unit of volatility. If you would invest 3,782 in PIMCO RAFI ESG on November 3, 2024 and sell it today you would lose (5.00) from holding PIMCO RAFI ESG or give up 0.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers SP 500 vs. PIMCO RAFI ESG
Performance |
| Timeline |
| Xtrackers SP 500 |
| PIMCO RAFI ESG |
Xtrackers and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers and PIMCO RAFI
The main advantage of trading using opposite Xtrackers and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers 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.| Xtrackers vs. Xtrackers MSCI USA | Xtrackers vs. iShares ESG MSCI | Xtrackers vs. SPDR SP 500 | Xtrackers vs. iShares MSCI USA |
| PIMCO RAFI vs. IQ Candriam ESG | PIMCO RAFI vs. Nuveen ESG Large Cap | PIMCO RAFI vs. Xtrackers MSCI EAFE | PIMCO RAFI vs. Xtrackers 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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