Correlation Between Invesco QQQ and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both Invesco QQQ 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 Invesco QQQ and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco QQQ Trust and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on Invesco QQQ 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 Invesco QQQ with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco QQQ and PIMCO RAFI.
Diversification Opportunities for Invesco QQQ and PIMCO RAFI
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and PIMCO is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Invesco QQQ Trust 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 Invesco QQQ 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 Invesco QQQ Trust 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 Invesco QQQ i.e., Invesco QQQ and PIMCO RAFI go up and down completely randomly.
Pair Corralation between Invesco QQQ and PIMCO RAFI
Considering the 90-day investment horizon Invesco QQQ Trust is expected to under-perform the PIMCO RAFI. In addition to that, Invesco QQQ is 1.44 times more volatile than PIMCO RAFI Dynamic. It trades about -0.17 of its total potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about -0.05 per unit of volatility. If you would invest 1,934 in PIMCO RAFI Dynamic on January 26, 2024 and sell it today you would lose (15.30) from holding PIMCO RAFI Dynamic or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco QQQ Trust vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| Invesco QQQ Trust |
| PIMCO RAFI Dynamic |
Invesco QQQ and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco QQQ and PIMCO RAFI
The main advantage of trading using opposite Invesco QQQ and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco QQQ 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.| Invesco QQQ vs. iShares Small Cap | Invesco QQQ vs. Pacer Cash Cows | Invesco QQQ vs. GXO Logistics | Invesco QQQ vs. Amplify CWP Enhanced |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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