Correlation Between American Century and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both American Century 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 American Century and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century STOXX and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on American Century 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 American Century with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and PIMCO RAFI.
Diversification Opportunities for American Century and PIMCO RAFI
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and PIMCO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American Century STOXX 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 American Century 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 American Century STOXX 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 American Century i.e., American Century and PIMCO RAFI go up and down completely randomly.
Pair Corralation between American Century and PIMCO RAFI
Given the investment horizon of 90 days American Century STOXX is expected to generate 0.93 times more return on investment than PIMCO RAFI. However, American Century STOXX is 1.08 times less risky than PIMCO RAFI. It trades about 0.41 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.37 per unit of risk. If you would invest 6,097 in American Century STOXX on September 3, 2024 and sell it today you would earn a total of 362.00 from holding American Century STOXX or generate 5.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century STOXX vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| American Century STOXX |
| PIMCO RAFI Dynamic |
American Century and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and PIMCO RAFI
The main advantage of trading using opposite American Century and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century 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.| American Century vs. American Century Quality | American Century vs. Invesco SP 500 | American Century vs. American Century Diversified | American Century vs. Invesco SP SmallCap |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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