Correlation Between PIMCO RAFI and Fidelity Covington

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

Diversification Opportunities for PIMCO RAFI and Fidelity Covington

-0.44

Correlation Coefficient

PIMCO RAFI  Fidelity Covington

Very good diversification

The 3 months correlation between PIMCO and Fidelity is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust 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 Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Fidelity Covington go up and down completely randomly.

Pair Corralation between PIMCO RAFI and Fidelity Covington

Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to generate 0.59 times more return on investment than Fidelity Covington. However, PIMCO RAFI Dynamic is 1.7 times less risky than Fidelity Covington. It trades about 0.21 of its potential returns per unit of risk. Fidelity Covington Trust is currently generating about -0.05 per unit of risk. If you would invest  2,968  in PIMCO RAFI Dynamic on December 26, 2024 and sell it today you would earn a total of  301.00  from holding PIMCO RAFI Dynamic or generate 10.14% return on investment over 90 days.

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

PIMCO RAFI Dynamic  vs.  Fidelity Covington Trust

PIMCO RAFI Dynamic

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO RAFI Dynamic are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, PIMCO RAFI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fidelity Covington Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Covington Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fidelity Covington is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PIMCO RAFI and Fidelity Covington

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

The idea behind PIMCO RAFI Dynamic and Fidelity Covington Trust 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.