Correlation Between Vanguard Total and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Vanguard Total and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total World and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on Vanguard Total 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 Vanguard Total with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and PIMCO RAFI.
Diversification Opportunities for Vanguard Total and PIMCO RAFI
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and PIMCO is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total World 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 Vanguard Total 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 Vanguard Total World 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 Vanguard Total i.e., Vanguard Total and PIMCO RAFI go up and down completely randomly.
Pair Corralation between Vanguard Total and PIMCO RAFI
Allowing for the 90-day total investment horizon Vanguard Total is expected to generate 1.58 times less return on investment than PIMCO RAFI. In addition to that, Vanguard Total is 1.16 times more volatile than PIMCO RAFI Dynamic. It trades about 0.12 of its total potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.22 per unit of volatility. If you would invest 2,952 in PIMCO RAFI Dynamic on October 23, 2024 and sell it today you would earn a total of 85.00 from holding PIMCO RAFI Dynamic or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total World vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| Vanguard Total World |
| PIMCO RAFI Dynamic |
Vanguard Total and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and PIMCO RAFI
The main advantage of trading using opposite Vanguard Total and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard FTSE Emerging |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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