Correlation Between Industrial Select and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both Industrial Select 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 Industrial Select and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Select Sector and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on Industrial Select 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 Industrial Select with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Select and PIMCO RAFI.
Diversification Opportunities for Industrial Select and PIMCO RAFI
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Industrial and PIMCO is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Select Sector 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 Industrial Select 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 Industrial Select Sector 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 Industrial Select i.e., Industrial Select and PIMCO RAFI go up and down completely randomly.
Pair Corralation between Industrial Select and PIMCO RAFI
Considering the 90-day investment horizon Industrial Select Sector is expected to under-perform the PIMCO RAFI. But the etf apears to be less risky and, when comparing its historical volatility, Industrial Select Sector is 1.04 times less risky than PIMCO RAFI. The etf trades about -0.19 of its potential returns per unit of risk. The PIMCO RAFI Dynamic is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 1,943 in PIMCO RAFI Dynamic on January 20, 2024 and sell it today you would lose (45.00) from holding PIMCO RAFI Dynamic or give up 2.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Select Sector vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| Industrial Select Sector |
| PIMCO RAFI Dynamic |
Industrial Select and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Select and PIMCO RAFI
The main advantage of trading using opposite Industrial Select and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Select 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.| Industrial Select vs. Invesco DWA Utilities | Industrial Select vs. Invesco Dynamic Food | Industrial Select vs. HUMANA INC | Industrial Select vs. Aquagold International |
| PIMCO RAFI vs. PIMCO RAFI Dynamic | PIMCO RAFI vs. PIMCO RAFI Dynamic | PIMCO RAFI vs. JPMorgan Diversified Return | PIMCO RAFI vs. JPMorgan Diversified Return |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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