Correlation Between PIMCO RAFI and Fidelity Blue

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

Diversification Opportunities for PIMCO RAFI and Fidelity Blue

-0.6

Correlation Coefficient

PIMCO RAFI  Fidelity Blue

Excellent diversification

The 3 months correlation between PIMCO and Fidelity is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Fidelity Blue Chip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Blue Chip 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 Fidelity Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Blue Chip has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Fidelity Blue go up and down completely randomly.

Pair Corralation between PIMCO RAFI and Fidelity Blue

Given the investment horizon of 90 days PIMCO RAFI is expected to generate 3.52 times less return on investment than Fidelity Blue. But when comparing it to its historical volatility, PIMCO RAFI Dynamic is 1.62 times less risky than Fidelity Blue. It trades about 0.06 of its potential returns per unit of risk. Fidelity Blue Chip is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,079  in Fidelity Blue Chip on September 15, 2024 and sell it today you would earn a total of  2,695  from holding Fidelity Blue Chip or generate 129.63% return on investment over 90 days.

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

PIMCO RAFI Dynamic  vs.  Fidelity Blue Chip

PIMCO RAFI Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO RAFI Dynamic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, PIMCO RAFI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Blue Chip

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Blue Chip are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Fidelity Blue reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PIMCO RAFI and Fidelity Blue

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

The idea behind PIMCO RAFI Dynamic and Fidelity Blue Chip 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.