Correlation Between PIMCO Active and First Trust

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

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

Diversification Opportunities for PIMCO Active and First Trust

0.98

Correlation Coefficient

PIMCO Active  First Trust

Almost no diversification

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

Pair Corralation between PIMCO Active and First Trust

Given the investment horizon of 90 days PIMCO Active Bond is expected to generate 0.93 times more return on investment than First Trust. However, PIMCO Active Bond is 1.07 times less risky than First Trust. It trades about 0.14 of its potential returns per unit of risk. First Trust TCW is currently generating about 0.09 per unit of risk. If you would invest  9,074  in PIMCO Active Bond on September 16, 2024 and sell it today you would earn a total of  80.00  from holding PIMCO Active Bond or generate 0.88% return on investment over 90 days.

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

PIMCO Active Bond  vs.  First Trust TCW

PIMCO Active Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Active Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PIMCO Active is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust TCW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust TCW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PIMCO Active and First Trust

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

The idea behind PIMCO Active Bond and First Trust TCW 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.