Correlation Between Impact Shares and PIMCO RAFI

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

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

Diversification Opportunities for Impact Shares and PIMCO RAFI

0.95

Correlation Coefficient

Impact Shares  PIMCO RAFI

Almost no diversification

The 3 months correlation between Impact and PIMCO is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Impact Shares YWCA 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 Impact Shares 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 Impact Shares YWCA 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 Impact Shares i.e., Impact Shares and PIMCO RAFI go up and down completely randomly.

Pair Corralation between Impact Shares and PIMCO RAFI

Given the investment horizon of 90 days Impact Shares YWCA is expected to under-perform the PIMCO RAFI. But the etf apears to be less risky and, when comparing its historical volatility, Impact Shares YWCA is 1.1 times less risky than PIMCO RAFI. The etf trades about -0.26 of its potential returns per unit of risk. The PIMCO RAFI Dynamic is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  5,131  in PIMCO RAFI Dynamic on October 11, 2024 and sell it today you would lose (140.00) from holding PIMCO RAFI Dynamic or give up 2.73% of portfolio value over 90 days.

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

Impact Shares YWCA  vs.  PIMCO RAFI Dynamic

Impact Shares YWCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impact Shares YWCA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Impact Shares is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 Impact Shares and PIMCO RAFI

The main advantage of trading using opposite Impact Shares and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Impact Shares 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 Impact Shares YWCA 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.