Correlation Between PIMCO RAFI and Invesco ESG

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

Diversification Opportunities for PIMCO RAFI and Invesco ESG

-0.55

Correlation Coefficient

PIMCO RAFI  Invesco ESG

Excellent diversification

The 3 months correlation between PIMCO and Invesco is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Invesco ESG NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco ESG NASDAQ 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 Invesco ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco ESG NASDAQ has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Invesco ESG go up and down completely randomly.

Pair Corralation between PIMCO RAFI and Invesco ESG

Given the investment horizon of 90 days PIMCO RAFI is expected to generate 2.45 times less return on investment than Invesco ESG. But when comparing it to its historical volatility, PIMCO RAFI Dynamic is 1.55 times less risky than Invesco ESG. It trades about 0.07 of its potential returns per unit of risk. Invesco ESG NASDAQ is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,656  in Invesco ESG NASDAQ on September 14, 2024 and sell it today you would earn a total of  955.00  from holding Invesco ESG NASDAQ or generate 35.96% 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.  Invesco ESG NASDAQ

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Invesco ESG NASDAQ

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco ESG NASDAQ are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Invesco ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PIMCO RAFI and Invesco ESG

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

The idea behind PIMCO RAFI Dynamic and Invesco ESG NASDAQ 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.