Correlation Between PIMCO RAFI and Barclays ETN
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and Barclays ETN 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 Barclays ETN 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 Barclays ETN Shiller, you can compare the effects of market volatilities on PIMCO RAFI and Barclays ETN 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 Barclays ETN. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Barclays ETN.
Diversification Opportunities for PIMCO RAFI and Barclays ETN
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PIMCO and Barclays is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Barclays ETN Shiller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays ETN Shiller 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 Barclays ETN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays ETN Shiller has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Barclays ETN go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Barclays ETN
Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to generate 0.95 times more return on investment than Barclays ETN. However, PIMCO RAFI Dynamic is 1.06 times less risky than Barclays ETN. It trades about -0.06 of its potential returns per unit of risk. Barclays ETN Shiller is currently generating about -0.16 per unit of risk. If you would invest 1,939 in PIMCO RAFI Dynamic on January 25, 2024 and sell it today you would lose (20.30) from holding PIMCO RAFI Dynamic or give up 1.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. Barclays ETN Shiller
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| Barclays ETN Shiller |
PIMCO RAFI and Barclays ETN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and Barclays ETN
The main advantage of trading using opposite PIMCO RAFI and Barclays ETN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Barclays ETN 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 Barclays ETN will offset losses from the drop in Barclays ETN's long position.The idea behind PIMCO RAFI Dynamic and Barclays ETN Shiller 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.| Barclays ETN vs. Hartford Multifactor Emerging | Barclays ETN vs. Hartford Multifactor Developed | Barclays ETN vs. iShares Equity Factor | Barclays ETN vs. SPDR MSCI USA |
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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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