Correlation Between PIMCO RAFI and IShares Core
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and IShares Core 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 PIMCO RAFI and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PIMCO RAFI Dynamic and iShares Core MSCI, you can compare the effects of market volatilities on PIMCO RAFI and IShares Core 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 PIMCO RAFI with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and IShares Core.
Diversification Opportunities for PIMCO RAFI and IShares Core
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PIMCO and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI and PIMCO RAFI 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 PIMCO RAFI Dynamic are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and IShares Core go up and down completely randomly.
Pair Corralation between PIMCO RAFI and IShares Core
Given the investment horizon of 90 days PIMCO RAFI is expected to generate 15.1 times less return on investment than IShares Core. In addition to that, PIMCO RAFI is 1.05 times more volatile than iShares Core MSCI. It trades about 0.0 of its total potential returns per unit of risk. iShares Core MSCI is currently generating about 0.05 per unit of volatility. If you would invest 7,077 in iShares Core MSCI on January 17, 2024 and sell it today you would earn a total of 87.00 from holding iShares Core MSCI or generate 1.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. iShares Core MSCI
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| iShares Core MSCI |
PIMCO RAFI and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and IShares Core
The main advantage of trading using opposite PIMCO RAFI and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.| PIMCO RAFI vs. Schwab Fundamental International | PIMCO RAFI vs. Schwab Fundamental International | PIMCO RAFI vs. Schwab Fundamental Small | PIMCO RAFI vs. Schwab Fundamental Large |
| IShares Core vs. Invesco SP SmallCap | IShares Core vs. iShares MSCI Europe | IShares Core vs. HUMANA INC | IShares Core vs. Morningstar Unconstrained Allocation |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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