Correlation Between PIMCO RAFI and VictoryShares USAA

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

Diversification Opportunities for PIMCO RAFI and VictoryShares USAA

0.32

Correlation Coefficient

PIMCO RAFI  VictoryShares USAA

Weak diversification

The 3 months correlation between PIMCO and VictoryShares is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and VictoryShares USAA Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares USAA Core 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 VictoryShares USAA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares USAA Core has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and VictoryShares USAA go up and down completely randomly.

Pair Corralation between PIMCO RAFI and VictoryShares USAA

Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to under-perform the VictoryShares USAA. In addition to that, PIMCO RAFI is 1.96 times more volatile than VictoryShares USAA Core. It trades about -0.04 of its total potential returns per unit of risk. VictoryShares USAA Core is currently generating about 0.0 per unit of volatility. If you would invest  4,576  in VictoryShares USAA Core on February 6, 2024 and sell it today you would lose (2.00) from holding VictoryShares USAA Core or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PIMCO RAFI Dynamic  vs.  VictoryShares USAA Core

PIMCO RAFI Dynamic

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO RAFI Dynamic are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, PIMCO RAFI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

VictoryShares USAA Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VictoryShares USAA Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VictoryShares USAA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PIMCO RAFI and VictoryShares USAA

The main advantage of trading using opposite PIMCO RAFI and VictoryShares USAA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, VictoryShares USAA 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 VictoryShares USAA will offset losses from the drop in VictoryShares USAA's long position.

The idea behind PIMCO RAFI Dynamic and VictoryShares USAA Core 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.