Correlation Between First Trust and Pimco New

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

By analyzing existing cross correlation between First Trust Senior and Pimco New York, you can compare the effects of market volatilities on First Trust and Pimco New 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 First Trust with a short position of Pimco New. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Pimco New.

Diversification Opportunities for First Trust and Pimco New

0.28

Correlation Coefficient

First Trust  Pimco New

Modest diversification

The 3 months correlation between First and Pimco is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Pimco New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco New York and First Trust 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 First Trust Senior are associated (or correlated) with Pimco New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco New York has no effect on the direction of First Trust i.e., First Trust and Pimco New go up and down completely randomly.

Pair Corralation between First Trust and Pimco New

Considering the 90-day investment horizon First Trust Senior is expected to generate 0.81 times more return on investment than Pimco New. However, First Trust Senior is 1.24 times less risky than Pimco New. It trades about 0.11 of its potential returns per unit of risk. Pimco New York is currently generating about 0.0 per unit of risk. If you would invest  745.00  in First Trust Senior on December 4, 2024 and sell it today you would earn a total of  275.00  from holding First Trust Senior or generate 36.91% return on investment over 90 days.

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

First Trust Senior  vs.  Pimco New York

First Trust Senior

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pimco New York

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco New York has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, Pimco New is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Trust and Pimco New

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

The idea behind First Trust Senior and Pimco New York 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.