Correlation Between PIMCO RAFI and Pacer Export

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

Diversification Opportunities for PIMCO RAFI and Pacer Export

0.82

Correlation Coefficient

PIMCO RAFI  Pacer Export

Very poor diversification

The 3 months correlation between PIMCO and Pacer is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Pacer Export Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Export Leaders 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 Pacer Export. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Export Leaders has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Pacer Export go up and down completely randomly.

Pair Corralation between PIMCO RAFI and Pacer Export

Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to under-perform the Pacer Export. But the etf apears to be less risky and, when comparing its historical volatility, PIMCO RAFI Dynamic is 1.27 times less risky than Pacer Export. The etf trades about -0.16 of its potential returns per unit of risk. The Pacer Export Leaders is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  5,017  in Pacer Export Leaders on October 11, 2024 and sell it today you would lose (110.00) from holding Pacer Export Leaders or give up 2.19% of portfolio value over 90 days.

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

PIMCO RAFI Dynamic  vs.  Pacer Export Leaders

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 comparatively stable basic indicators, PIMCO RAFI is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pacer Export Leaders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer Export Leaders has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Pacer Export is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PIMCO RAFI and Pacer Export

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

The idea behind PIMCO RAFI Dynamic and Pacer Export Leaders 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.