Correlation Between American Century and PIMCO RAFI

Can any of the company-specific risk be diversified away by investing in both American Century and PIMCO RAFI 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 American Century and PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Century STOXX and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on American Century and PIMCO RAFI 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 American Century with a short position of PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and PIMCO RAFI.

Diversification Opportunities for American Century and PIMCO RAFI

0.97

Correlation Coefficient

American Century  PIMCO RAFI

Almost no diversification

The 3 months correlation between American and PIMCO is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding American Century STOXX and PIMCO RAFI Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO RAFI Dynamic and American Century 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 American Century STOXX are associated (or correlated) with PIMCO RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO RAFI Dynamic has no effect on the direction of American Century i.e., American Century and PIMCO RAFI go up and down completely randomly.

Pair Corralation between American Century and PIMCO RAFI

Given the investment horizon of 90 days American Century STOXX is expected to under-perform the PIMCO RAFI. But the etf apears to be less risky and, when comparing its historical volatility, American Century STOXX is 1.17 times less risky than PIMCO RAFI. The etf trades about -0.31 of its potential returns per unit of risk. The PIMCO RAFI Dynamic is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  5,229  in PIMCO RAFI Dynamic on October 6, 2024 and sell it today you would lose (224.00) from holding PIMCO RAFI Dynamic or give up 4.28% of portfolio value over 90 days.

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

American Century STOXX  vs.  PIMCO RAFI Dynamic

American Century STOXX

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Century STOXX are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, American Century is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with American Century and PIMCO RAFI

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

The idea behind American Century STOXX and PIMCO RAFI Dynamic 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.