Correlation Between PIMCO RAFI and Citigroup
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and Citigroup 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 Citigroup 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 Citigroup, you can compare the effects of market volatilities on PIMCO RAFI and Citigroup 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 Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Citigroup.
Diversification Opportunities for PIMCO RAFI and Citigroup
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PIMCO and Citigroup is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup 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 Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Citigroup go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Citigroup
Given the investment horizon of 90 days PIMCO RAFI is expected to generate 6.67 times less return on investment than Citigroup. But when comparing it to its historical volatility, PIMCO RAFI Dynamic is 1.66 times less risky than Citigroup. It trades about 0.18 of its potential returns per unit of risk. Citigroup is currently generating about 0.71 of returns per unit of risk over similar time horizon. If you would invest 5,505 in Citigroup on December 30, 2023 and sell it today you would earn a total of 819.00 from holding Citigroup or generate 14.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
PIMCO RAFI Dynamic vs. Citigroup
Performance |
Timeline |
PIMCO RAFI Dynamic |
Citigroup |
PIMCO RAFI and Citigroup Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PIMCO RAFI and Citigroup
The main advantage of trading using opposite PIMCO RAFI and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.PIMCO RAFI vs. Freedom Day Dividend | PIMCO RAFI vs. Franklin Templeton ETF | PIMCO RAFI vs. IShares MSCI China | PIMCO RAFI vs. YieldMax DIS Option |
Citigroup vs. Walt Disney | Citigroup vs. General Electric | Citigroup vs. McDonalds | Citigroup vs. International Business Machines |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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