Correlation Between PIMCO RAFI and Harbor Long

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

Diversification Opportunities for PIMCO RAFI and Harbor Long

-0.65

Correlation Coefficient

PIMCO RAFI  Harbor Long

Excellent diversification

The 3 months correlation between PIMCO and Harbor is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Harbor Long Term Growers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Long Term 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 Harbor Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Long Term has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Harbor Long go up and down completely randomly.

Pair Corralation between PIMCO RAFI and Harbor Long

Given the investment horizon of 90 days PIMCO RAFI is expected to generate 20.62 times less return on investment than Harbor Long. But when comparing it to its historical volatility, PIMCO RAFI Dynamic is 1.54 times less risky than Harbor Long. It trades about 0.03 of its potential returns per unit of risk. Harbor Long Term Growers is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  2,635  in Harbor Long Term Growers on September 19, 2024 and sell it today you would earn a total of  198.00  from holding Harbor Long Term Growers or generate 7.51% 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.  Harbor Long Term Growers

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.

Harbor Long Term

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Long Term Growers are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Harbor Long may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PIMCO RAFI and Harbor Long

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

The idea behind PIMCO RAFI Dynamic and Harbor Long Term Growers 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.