Correlation Between PIMCO RAFI and Sterling Capital

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

Diversification Opportunities for PIMCO RAFI and Sterling Capital

0.74

Correlation Coefficient

PIMCO RAFI  Sterling Capital

Poor diversification

The 3 months correlation between PIMCO and Sterling is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Sterling Capital Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Focus 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Focus has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Sterling Capital go up and down completely randomly.

Pair Corralation between PIMCO RAFI and Sterling Capital

Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to generate 0.57 times more return on investment than Sterling Capital. However, PIMCO RAFI Dynamic is 1.75 times less risky than Sterling Capital. It trades about 0.09 of its potential returns per unit of risk. Sterling Capital Focus is currently generating about 0.04 per unit of risk. If you would invest  3,039  in PIMCO RAFI Dynamic on March 5, 2025 and sell it today you would earn a total of  506.00  from holding PIMCO RAFI Dynamic or generate 16.65% 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.  Sterling Capital Focus

PIMCO RAFI Dynamic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO RAFI Dynamic are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, PIMCO RAFI may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Sterling Capital Focus

Risk-Adjusted Performance

Weak

Over the last 90 days Sterling Capital Focus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PIMCO RAFI and Sterling Capital

The main advantage of trading using opposite PIMCO RAFI and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.

The idea behind PIMCO RAFI Dynamic and Sterling Capital Focus 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.