Correlation Between PIMCO RAFI and Consumer Discretionary
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and Consumer Discretionary 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 Consumer Discretionary 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 Consumer Discretionary Select, you can compare the effects of market volatilities on PIMCO RAFI and Consumer Discretionary 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 Consumer Discretionary. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Consumer Discretionary.
Diversification Opportunities for PIMCO RAFI and Consumer Discretionary
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PIMCO and Consumer is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Consumer Discretionary Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Discretionary 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 Consumer Discretionary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Discretionary has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Consumer Discretionary go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Consumer Discretionary
Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to generate 0.85 times more return on investment than Consumer Discretionary. However, PIMCO RAFI Dynamic is 1.18 times less risky than Consumer Discretionary. It trades about -0.19 of its potential returns per unit of risk. Consumer Discretionary Select is currently generating about -0.44 per unit of risk. If you would invest 1,954 in PIMCO RAFI Dynamic on January 21, 2024 and sell it today you would lose (58.00) from holding PIMCO RAFI Dynamic or give up 2.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. Consumer Discretionary Select
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| Consumer Discretionary |
PIMCO RAFI and Consumer Discretionary Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and Consumer Discretionary
The main advantage of trading using opposite PIMCO RAFI and Consumer Discretionary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Consumer Discretionary 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 Consumer Discretionary will offset losses from the drop in Consumer Discretionary's long position.| PIMCO RAFI vs. PIMCO RAFI Dynamic | PIMCO RAFI vs. PIMCO RAFI Dynamic | PIMCO RAFI vs. JPMorgan Diversified Return | PIMCO RAFI vs. JPMorgan Diversified Return |
| Consumer Discretionary vs. Consumer Staples Select | Consumer Discretionary vs. Industrial Select Sector | Consumer Discretionary vs. Materials Select Sector | Consumer Discretionary vs. Health Care Select |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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