Correlation Between PIMCO RAFI and LVHE

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Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and LVHE 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 LVHE 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 LVHE, you can compare the effects of market volatilities on PIMCO RAFI and LVHE 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 LVHE. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and LVHE.

Diversification Opportunities for PIMCO RAFI and LVHE

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between PIMCO and LVHE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and LVHE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVHE 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 LVHE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVHE has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and LVHE go up and down completely randomly.

Pair Corralation between PIMCO RAFI and LVHE

If you would invest  1,935  in PIMCO RAFI Dynamic on December 29, 2023 and sell it today you would earn a total of  13.00  from holding PIMCO RAFI Dynamic or generate 0.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

PIMCO RAFI Dynamic  vs.  LVHE

 Performance 
       Timeline  
PIMCO RAFI Dynamic 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO RAFI Dynamic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, PIMCO RAFI is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
LVHE 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days LVHE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, LVHE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

PIMCO RAFI and LVHE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PIMCO RAFI and LVHE

The main advantage of trading using opposite PIMCO RAFI and LVHE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, LVHE 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 LVHE will offset losses from the drop in LVHE's long position.
The idea behind PIMCO RAFI Dynamic and LVHE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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