Correlation Between PIMCO RAFI and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI and Vanguard Total 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 Vanguard Total 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 Vanguard Total Stock, you can compare the effects of market volatilities on PIMCO RAFI and Vanguard Total 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 Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Vanguard Total.
Diversification Opportunities for PIMCO RAFI and Vanguard Total
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PIMCO and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Vanguard Total go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Vanguard Total
Given the investment horizon of 90 days PIMCO RAFI is expected to generate 2.43 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, PIMCO RAFI Dynamic is 1.24 times less risky than Vanguard Total. It trades about 0.02 of its potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 20,300 in Vanguard Total Stock on January 17, 2024 and sell it today you would earn a total of 4,689 from holding Vanguard Total Stock or generate 23.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. Vanguard Total Stock
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| Vanguard Total Stock |
PIMCO RAFI and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and Vanguard Total
The main advantage of trading using opposite PIMCO RAFI and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI position performs unexpectedly, Vanguard Total 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 Vanguard Total will offset losses from the drop in Vanguard Total's long position.| PIMCO RAFI vs. Schwab Fundamental International | PIMCO RAFI vs. Schwab Fundamental International | PIMCO RAFI vs. Schwab Fundamental Small | PIMCO RAFI vs. Schwab Fundamental Large |
| Vanguard Total vs. Natixis ETF Trust | Vanguard Total vs. HUMANA INC | Vanguard Total vs. Sparta Capital | Vanguard Total vs. T Rowe Price |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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