Correlation Between PIMCO RAFI and DBX ETF

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

Diversification Opportunities for PIMCO RAFI and DBX ETF

0.87

Correlation Coefficient

PIMCO RAFI  DBX ETF

Very poor diversification

The 3 months correlation between PIMCO and DBX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and DBX ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBX ETF 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 DBX ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBX ETF Trust has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and DBX ETF go up and down completely randomly.

Pair Corralation between PIMCO RAFI and DBX ETF

Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to under-perform the DBX ETF. In addition to that, PIMCO RAFI is 1.06 times more volatile than DBX ETF Trust. It trades about -0.26 of its total potential returns per unit of risk. DBX ETF Trust is currently generating about -0.22 per unit of volatility. If you would invest  5,431  in DBX ETF Trust on October 6, 2024 and sell it today you would lose (187.00) from holding DBX ETF Trust or give up 3.44% 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.  DBX ETF Trust

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.

DBX ETF Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DBX ETF Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, DBX ETF is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PIMCO RAFI and DBX ETF

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

The idea behind PIMCO RAFI Dynamic and DBX ETF 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.