Correlation Between State Street and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Corp and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on State Street 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 State Street with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and PIMCO RAFI.
Diversification Opportunities for State Street and PIMCO RAFI
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between State and PIMCO is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp 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 State Street 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 State Street Corp 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 State Street i.e., State Street and PIMCO RAFI go up and down completely randomly.
Pair Corralation between State Street and PIMCO RAFI
Considering the 90-day investment horizon State Street Corp is expected to generate 1.78 times more return on investment than PIMCO RAFI. However, State Street is 1.78 times more volatile than PIMCO RAFI Dynamic. It trades about -0.02 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about -0.08 per unit of risk. If you would invest 7,497 in State Street Corp on January 25, 2024 and sell it today you would lose (58.00) from holding State Street Corp or give up 0.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Corp vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| State Street Corp |
| PIMCO RAFI Dynamic |
State Street and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and PIMCO RAFI
The main advantage of trading using opposite State Street and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. Northern Trust | State Street vs. Franklin Resources | State Street vs. Invesco Plc | State Street vs. T Rowe Price |
| PIMCO RAFI vs. Pfizer Inc | PIMCO RAFI vs. LSI Industries | PIMCO RAFI vs. Retirement Living Through | PIMCO RAFI vs. HP Inc |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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