Correlation Between Vanguard Health and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both Vanguard Health 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 Vanguard Health and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Health Care and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on Vanguard Health 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 Vanguard Health with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and PIMCO RAFI.
Diversification Opportunities for Vanguard Health and PIMCO RAFI
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and PIMCO is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care 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 Vanguard Health 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 Vanguard Health Care 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 Vanguard Health i.e., Vanguard Health and PIMCO RAFI go up and down completely randomly.
Pair Corralation between Vanguard Health and PIMCO RAFI
Considering the 90-day investment horizon Vanguard Health is expected to generate 1.83 times less return on investment than PIMCO RAFI. But when comparing it to its historical volatility, Vanguard Health Care is 1.21 times less risky than PIMCO RAFI. It trades about 0.03 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 1,737 in PIMCO RAFI Dynamic on January 26, 2024 and sell it today you would earn a total of 181.70 from holding PIMCO RAFI Dynamic or generate 10.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Vanguard Health Care vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| Vanguard Health Care |
| PIMCO RAFI Dynamic |
Vanguard Health and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and PIMCO RAFI
The main advantage of trading using opposite Vanguard Health and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health 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.| Vanguard Health vs. iShares Insurance ETF | Vanguard Health vs. SCOR PK | Vanguard Health vs. Morningstar Unconstrained Allocation | Vanguard Health vs. SPACE |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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