Correlation Between Global X and PIMCO RAFI

Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X Conscious and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on Global X 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 Global X with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and PIMCO RAFI.

Diversification Opportunities for Global X and PIMCO RAFI

0.81

Correlation Coefficient

Global X  PIMCO RAFI

Very poor diversification

The 3 months correlation between Global and PIMCO is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Global X Conscious 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 Global X 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 Global X Conscious 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 Global X i.e., Global X and PIMCO RAFI go up and down completely randomly.

Pair Corralation between Global X and PIMCO RAFI

Given the investment horizon of 90 days Global X Conscious is expected to generate 1.07 times more return on investment than PIMCO RAFI. However, Global X is 1.07 times more volatile than PIMCO RAFI Dynamic. It trades about 0.09 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.09 per unit of risk. If you would invest  2,898  in Global X Conscious on October 26, 2024 and sell it today you would earn a total of  1,151  from holding Global X Conscious or generate 39.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Global X Conscious  vs.  PIMCO RAFI Dynamic

Global X Conscious

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Conscious are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Global X is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

PIMCO RAFI Dynamic

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO RAFI Dynamic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PIMCO RAFI is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Global X and PIMCO RAFI

The main advantage of trading using opposite Global X and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.

The idea behind Global X Conscious and PIMCO RAFI Dynamic 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.