Correlation Between PIMCO ETF and Franklin Liberty

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

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

Diversification Opportunities for PIMCO ETF and Franklin Liberty

0.98

Correlation Coefficient

PIMCO ETF  Franklin Liberty

Almost no diversification

The 3 months correlation between PIMCO and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO ETF Trust and Franklin Liberty Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Senior and PIMCO ETF 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 PIMCO ETF Trust are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Senior has no effect on the direction of PIMCO ETF i.e., PIMCO ETF and Franklin Liberty go up and down completely randomly.

Pair Corralation between PIMCO ETF and Franklin Liberty

Given the investment horizon of 90 days PIMCO ETF is expected to generate 1.35 times less return on investment than Franklin Liberty. In addition to that, PIMCO ETF is 1.3 times more volatile than Franklin Liberty Senior. It trades about 0.32 of its total potential returns per unit of risk. Franklin Liberty Senior is currently generating about 0.55 per unit of volatility. If you would invest  2,423  in Franklin Liberty Senior on October 25, 2024 and sell it today you would earn a total of  18.00  from holding Franklin Liberty Senior or generate 0.74% return on investment over 90 days.

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

PIMCO ETF Trust  vs.  Franklin Liberty Senior

PIMCO ETF Trust

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO ETF Trust are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PIMCO ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Liberty Senior

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Senior are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Franklin Liberty is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PIMCO ETF and Franklin Liberty

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

The idea behind PIMCO ETF Trust and Franklin Liberty Senior 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.