Correlation Between WisdomTree Corporate and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both WisdomTree Corporate 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 WisdomTree Corporate and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Corporate Bond and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on WisdomTree Corporate 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 WisdomTree Corporate with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Corporate and PIMCO RAFI.
Diversification Opportunities for WisdomTree Corporate and PIMCO RAFI
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WisdomTree and PIMCO is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Corporate Bond 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 WisdomTree Corporate 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 WisdomTree Corporate Bond 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 WisdomTree Corporate i.e., WisdomTree Corporate and PIMCO RAFI go up and down completely randomly.
Pair Corralation between WisdomTree Corporate and PIMCO RAFI
Given the investment horizon of 90 days WisdomTree Corporate is expected to generate 1.54 times less return on investment than PIMCO RAFI. But when comparing it to its historical volatility, WisdomTree Corporate Bond is 2.27 times less risky than PIMCO RAFI. It trades about 0.08 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,811 in PIMCO RAFI Dynamic on November 2, 2024 and sell it today you would earn a total of 260.95 from holding PIMCO RAFI Dynamic or generate 9.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 50.81% |
| Values | Daily Returns |
WisdomTree Corporate Bond vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| WisdomTree Corporate Bond |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| PIMCO RAFI Dynamic |
WisdomTree Corporate and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Corporate and PIMCO RAFI
The main advantage of trading using opposite WisdomTree Corporate and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Corporate 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.| WisdomTree Corporate vs. WisdomTree Yield Enhanced | WisdomTree Corporate vs. iShares Edge Investment | WisdomTree Corporate vs. FlexShares Credit Scored Long |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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