Correlation Between ProShares and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both ProShares 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 ProShares and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares SP 500 and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on ProShares 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 ProShares with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and PIMCO RAFI.
Diversification Opportunities for ProShares and PIMCO RAFI
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between ProShares and PIMCO is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP 500 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 ProShares 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 ProShares 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 Dynamic has no effect on the direction of ProShares i.e., ProShares and PIMCO RAFI go up and down completely randomly.
Pair Corralation between ProShares and PIMCO RAFI
Given the investment horizon of 90 days ProShares SP 500 is expected to generate 1.03 times more return on investment than PIMCO RAFI. However, ProShares is 1.03 times more volatile than PIMCO RAFI Dynamic. It trades about 0.11 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.05 per unit of risk. If you would invest 4,263 in ProShares SP 500 on November 2, 2024 and sell it today you would earn a total of 2,240 from holding ProShares SP 500 or generate 52.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares SP 500 vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| ProShares SP 500 |
| PIMCO RAFI Dynamic |
ProShares and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares and PIMCO RAFI
The main advantage of trading using opposite ProShares and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares 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.| ProShares vs. ProShares SP 500 | ProShares vs. ProShares SP 500 | ProShares vs. ProShares SP 500 | ProShares vs. ProShares Ultra High |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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