Correlation Between VictoryShares USAA and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both VictoryShares USAA 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 VictoryShares USAA and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VictoryShares USAA Core and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on VictoryShares USAA 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 VictoryShares USAA with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of VictoryShares USAA and PIMCO RAFI.
Diversification Opportunities for VictoryShares USAA and PIMCO RAFI
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between VictoryShares and PIMCO is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares USAA Core 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 VictoryShares USAA 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 VictoryShares USAA Core 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 VictoryShares USAA i.e., VictoryShares USAA and PIMCO RAFI go up and down completely randomly.
Pair Corralation between VictoryShares USAA and PIMCO RAFI
Given the investment horizon of 90 days VictoryShares USAA is expected to generate 34.9 times less return on investment than PIMCO RAFI. But when comparing it to its historical volatility, VictoryShares USAA Core is 1.82 times less risky than PIMCO RAFI. It trades about 0.0 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 2,702 in PIMCO RAFI Dynamic on January 21, 2024 and sell it today you would earn a total of 226.00 from holding PIMCO RAFI Dynamic or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VictoryShares USAA Core vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| VictoryShares USAA Core |
| PIMCO RAFI Dynamic |
VictoryShares USAA and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VictoryShares USAA and PIMCO RAFI
The main advantage of trading using opposite VictoryShares USAA and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VictoryShares USAA 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.The idea behind VictoryShares USAA Core and PIMCO RAFI Dynamic 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.
| PIMCO RAFI vs. iShares ESG Advanced | PIMCO RAFI vs. iShares ESG Advanced | PIMCO RAFI vs. iShares ESG MSCI | PIMCO RAFI vs. iShares ESG Aware |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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