Correlation Between Vanguard Emerging and Pimco Rae

Can any of the company-specific risk be diversified away by investing in both Vanguard Emerging and Pimco Rae 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 Vanguard Emerging and Pimco Rae into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Emerging Markets and Pimco Rae Fundamental, you can compare the effects of market volatilities on Vanguard Emerging and Pimco Rae 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 Vanguard Emerging with a short position of Pimco Rae. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Emerging and Pimco Rae.

Diversification Opportunities for Vanguard Emerging and Pimco Rae

0.84

Correlation Coefficient

Vanguard Emerging  Pimco Rae

Very poor diversification

The 3 months correlation between Vanguard and Pimco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Pimco Rae Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Rae Fundamental and Vanguard Emerging 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 Vanguard Emerging Markets are associated (or correlated) with Pimco Rae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Rae Fundamental has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Pimco Rae go up and down completely randomly.

Pair Corralation between Vanguard Emerging and Pimco Rae

Assuming the 90 days horizon Vanguard Emerging Markets is expected to generate 1.1 times more return on investment than Pimco Rae. However, Vanguard Emerging is 1.1 times more volatile than Pimco Rae Fundamental. It trades about -0.01 of its potential returns per unit of risk. Pimco Rae Fundamental is currently generating about -0.06 per unit of risk. If you would invest  2,835  in Vanguard Emerging Markets on December 2, 2024 and sell it today you would lose (13.00) from holding Vanguard Emerging Markets or give up 0.46% of portfolio value over 90 days.

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

Vanguard Emerging Markets  vs.  Pimco Rae Fundamental

Vanguard Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Vanguard Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Rae Fundamental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco Rae Fundamental has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Pimco Rae is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Emerging and Pimco Rae

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

The idea behind Vanguard Emerging Markets and Pimco Rae Fundamental 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.