Correlation Between SPDR Portfolio and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio 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 Portfolio 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 Portfolio SP and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on SPDR Portfolio 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 Portfolio with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and PIMCO RAFI.
Diversification Opportunities for SPDR Portfolio and PIMCO RAFI
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and PIMCO is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP 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 Portfolio 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 Portfolio SP 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 Portfolio i.e., SPDR Portfolio and PIMCO RAFI go up and down completely randomly.
Pair Corralation between SPDR Portfolio and PIMCO RAFI
Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.17 times less return on investment than PIMCO RAFI. But when comparing it to its historical volatility, SPDR Portfolio SP is 1.08 times less risky than PIMCO RAFI. It trades about 0.12 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,745 in PIMCO RAFI Dynamic on September 4, 2024 and sell it today you would earn a total of 1,510 from holding PIMCO RAFI Dynamic or generate 40.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
SPDR Portfolio SP vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| SPDR Portfolio SP |
| PIMCO RAFI Dynamic |
SPDR Portfolio and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Portfolio and PIMCO RAFI
The main advantage of trading using opposite SPDR Portfolio and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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 Portfolio vs. Global X Funds | SPDR Portfolio vs. Dell Technologies | SPDR Portfolio vs. Juniper Networks | SPDR Portfolio vs. HUMANA INC |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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