Correlation Between SPDR SP and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SP 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 SP Bank and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on SPDR SP 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 SP with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and PIMCO RAFI.
Diversification Opportunities for SPDR SP and PIMCO RAFI
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between SPDR and PIMCO is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Bank 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 SP 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 SP Bank 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 SP i.e., SPDR SP and PIMCO RAFI go up and down completely randomly.
Pair Corralation between SPDR SP and PIMCO RAFI
Considering the 90-day investment horizon SPDR SP Bank is expected to generate 2.31 times more return on investment than PIMCO RAFI. However, SPDR SP is 2.31 times more volatile than PIMCO RAFI Dynamic. It trades about 0.22 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 4,388 in SPDR SP Bank on December 29, 2023 and sell it today you would earn a total of 297.00 from holding SPDR SP Bank or generate 6.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
SPDR SP Bank vs. PIMCO RAFI Dynamic
Performance |
Timeline |
SPDR SP Bank |
PIMCO RAFI Dynamic |
SPDR SP and PIMCO RAFI Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SPDR SP and PIMCO RAFI
The main advantage of trading using opposite SPDR SP and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SP vs. Direxion Daily Regional | SPDR SP vs. IShares MSCI Europe | SPDR SP vs. Fidelity MSCI Financials | SPDR SP vs. Direxion Daily Financial |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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