Correlation Between PIMCO RAFI and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and Goldman Sachs 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 Goldman Sachs 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 Goldman Sachs ActiveBeta, you can compare the effects of market volatilities on PIMCO RAFI and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Goldman Sachs.
Diversification Opportunities for PIMCO RAFI and Goldman Sachs
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PIMCO and Goldman is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs ActiveBeta has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Goldman Sachs go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Goldman Sachs
Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to under-perform the Goldman Sachs. But the etf apears to be less risky and, when comparing its historical volatility, PIMCO RAFI Dynamic is 1.06 times less risky than Goldman Sachs. The etf trades about -0.06 of its potential returns per unit of risk. The Goldman Sachs ActiveBeta is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 3,126 in Goldman Sachs ActiveBeta on January 25, 2024 and sell it today you would lose (27.00) from holding Goldman Sachs ActiveBeta or give up 0.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. Goldman Sachs ActiveBeta
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| Goldman Sachs ActiveBeta |
PIMCO RAFI and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and Goldman Sachs
The main advantage of trading using opposite PIMCO RAFI and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.The idea behind PIMCO RAFI Dynamic and Goldman Sachs ActiveBeta 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.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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