Correlation Between IShares Short and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both IShares Short 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 IShares Short and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Short Maturity and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on IShares Short 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 IShares Short with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Short and PIMCO RAFI.
Diversification Opportunities for IShares Short and PIMCO RAFI
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and PIMCO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Maturity 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 IShares Short 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 iShares Short Maturity 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 IShares Short i.e., IShares Short and PIMCO RAFI go up and down completely randomly.
Pair Corralation between IShares Short and PIMCO RAFI
Given the investment horizon of 90 days iShares Short Maturity is expected to generate 0.19 times more return on investment than PIMCO RAFI. However, iShares Short Maturity is 5.28 times less risky than PIMCO RAFI. It trades about -0.09 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about -0.16 per unit of risk. If you would invest 5,020 in iShares Short Maturity on January 26, 2024 and sell it today you would lose (12.00) from holding iShares Short Maturity or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Short Maturity vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| iShares Short Maturity |
| PIMCO RAFI Dynamic |
IShares Short and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Short and PIMCO RAFI
The main advantage of trading using opposite IShares Short and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short 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.| IShares Short vs. iShares ESG 1 5 | IShares Short vs. First Trust Low | IShares Short vs. First Trust Managed | IShares Short vs. First Trust Senior |
| PIMCO RAFI vs. SPDR MSCI Emerging | PIMCO RAFI vs. SPDR MSCI USA | PIMCO RAFI vs. SPDR MSCI World | PIMCO RAFI vs. SPDR SSGA Large |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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