Correlation Between PIMCO RAFI and DBX ETF

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

Diversification Opportunities for PIMCO RAFI and DBX ETF

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between PIMCO and DBX is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and DBX ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBX ETF Trust 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 DBX ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBX ETF Trust has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and DBX ETF go up and down completely randomly.

Pair Corralation between PIMCO RAFI and DBX ETF

Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to generate 0.83 times more return on investment than DBX ETF. However, PIMCO RAFI Dynamic is 1.21 times less risky than DBX ETF. It trades about 0.06 of its potential returns per unit of risk. DBX ETF Trust is currently generating about 0.01 per unit of risk. If you would invest  1,749  in PIMCO RAFI Dynamic on December 30, 2023 and sell it today you would earn a total of  206.00  from holding PIMCO RAFI Dynamic or generate 11.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.6%
ValuesDaily Returns

PIMCO RAFI Dynamic  vs.  DBX ETF Trust

 Performance 
       Timeline  
PIMCO RAFI Dynamic 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO RAFI Dynamic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, PIMCO RAFI is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
DBX ETF Trust 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in DBX ETF Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DBX ETF is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

PIMCO RAFI and DBX ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PIMCO RAFI and DBX ETF

The main advantage of trading using opposite PIMCO RAFI and DBX ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, DBX ETF 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 DBX ETF will offset losses from the drop in DBX ETF's long position.
The idea behind PIMCO RAFI Dynamic and DBX ETF Trust 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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