Correlation Between PIMCO RAFI and American Century

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

Diversification Opportunities for PIMCO RAFI and American Century

1.0

Correlation Coefficient

PIMCO RAFI  American Century

No risk reduction

The 3 months correlation between PIMCO and American is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and American Century Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Quality 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Quality has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and American Century go up and down completely randomly.

Pair Corralation between PIMCO RAFI and American Century

Given the investment horizon of 90 days PIMCO RAFI is expected to generate 1.06 times less return on investment than American Century. But when comparing it to its historical volatility, PIMCO RAFI Dynamic is 1.13 times less risky than American Century. It trades about 0.25 of its potential returns per unit of risk. American Century Quality is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,767  in American Century Quality on December 20, 2024 and sell it today you would earn a total of  617.00  from holding American Century Quality or generate 12.94% return on investment over 90 days.

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

PIMCO RAFI Dynamic  vs.  American Century Quality

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 19 (%) 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.

American Century Quality

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Century Quality are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, American Century unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PIMCO RAFI and American Century

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

The idea behind PIMCO RAFI Dynamic and American Century Quality 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.