Correlation Between PIMCO Access and First Trust

Can any of the company-specific risk be diversified away by investing in both PIMCO Access 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 Access 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 Access Income and First Trust Mortgage, you can compare the effects of market volatilities on PIMCO Access 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 Access with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Access and First Trust.

Diversification Opportunities for PIMCO Access and First Trust

0.42

Correlation Coefficient

PIMCO Access  First Trust

Very weak diversification

The 3 months correlation between PIMCO and First is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Access Income and First Trust Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Mortgage and PIMCO Access 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 Access Income 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 Mortgage has no effect on the direction of PIMCO Access i.e., PIMCO Access and First Trust go up and down completely randomly.

Pair Corralation between PIMCO Access and First Trust

Given the investment horizon of 90 days PIMCO Access Income is expected to under-perform the First Trust. In addition to that, PIMCO Access is 1.22 times more volatile than First Trust Mortgage. It trades about -0.01 of its total potential returns per unit of risk. First Trust Mortgage is currently generating about -0.01 per unit of volatility. If you would invest  1,224  in First Trust Mortgage on September 15, 2024 and sell it today you would lose (9.00) from holding First Trust Mortgage or give up 0.74% of portfolio value over 90 days.

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

PIMCO Access Income  vs.  First Trust Mortgage

PIMCO Access Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Access Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PIMCO Access is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Mortgage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PIMCO Access and First Trust

The main advantage of trading using opposite PIMCO Access and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO Access 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 Access Income and First Trust Mortgage 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.