Correlation Between First Trust and PIMCO Short

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

By analyzing existing cross correlation between First Trust Short and PIMCO Short Term, you can compare the effects of market volatilities on First Trust and PIMCO Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and PIMCO Short.

Diversification Opportunities for First Trust and PIMCO Short

0.97

Correlation Coefficient

First Trust  PIMCO Short

Almost no diversification

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

Pair Corralation between First Trust and PIMCO Short

Given the investment horizon of 90 days First Trust is expected to generate 1.24 times less return on investment than PIMCO Short. In addition to that, First Trust is 1.3 times more volatile than PIMCO Short Term. It trades about 0.06 of its total potential returns per unit of risk. PIMCO Short Term is currently generating about 0.1 per unit of volatility. If you would invest  4,961  in PIMCO Short Term on December 28, 2024 and sell it today you would earn a total of  25.00  from holding PIMCO Short Term or generate 0.5% return on investment over 90 days.

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

First Trust Short  vs.  PIMCO Short Term

First Trust Short

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PIMCO Short Term

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Short Term are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, PIMCO Short is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and PIMCO Short

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

The idea behind First Trust Short and PIMCO Short Term 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.