Correlation Between IShares Core and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both IShares Core 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 IShares Core and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on IShares Core 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 IShares Core with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and PIMCO RAFI.
Diversification Opportunities for IShares Core and PIMCO RAFI
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and PIMCO is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP 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 IShares Core 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 iShares Core SP 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 IShares Core i.e., IShares Core and PIMCO RAFI go up and down completely randomly.
Pair Corralation between IShares Core and PIMCO RAFI
Given the investment horizon of 90 days iShares Core SP is expected to generate 1.08 times more return on investment than PIMCO RAFI. However, IShares Core is 1.08 times more volatile than PIMCO RAFI Dynamic. It trades about 0.0 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about -0.01 per unit of risk. If you would invest 11,112 in iShares Core SP on January 25, 2024 and sell it today you would lose (1.00) from holding iShares Core SP or give up 0.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| iShares Core SP |
| PIMCO RAFI Dynamic |
IShares Core and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and PIMCO RAFI
The main advantage of trading using opposite IShares Core and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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.| IShares Core vs. SPDR MSCI EAFE | IShares Core vs. SPDR MSCI Emerging | IShares Core vs. SPDR Russell 1000 | IShares Core vs. SPDR Russell 1000 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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