Correlation Between Pimco Corporate and First Trust

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

Diversification Opportunities for Pimco Corporate and First Trust

0.21

Correlation Coefficient

Pimco Corporate  First Trust

Modest diversification

The 3 months correlation between Pimco and First is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Corporate 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 Corporate 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 Corporate 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 Corporate i.e., Pimco Corporate and First Trust go up and down completely randomly.

Pair Corralation between Pimco Corporate and First Trust

Considering the 90-day investment horizon Pimco Corporate Income is expected to generate 1.13 times more return on investment than First Trust. However, Pimco Corporate is 1.13 times more volatile than First Trust Mortgage. It trades about 0.08 of its potential returns per unit of risk. First Trust Mortgage is currently generating about 0.05 per unit of risk. If you would invest  961.00  in Pimco Corporate Income on September 14, 2024 and sell it today you would earn a total of  427.00  from holding Pimco Corporate Income or generate 44.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Pimco Corporate Income  vs.  First Trust Mortgage

Pimco Corporate Income

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Corporate Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy fundamental indicators, Pimco Corporate is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the 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 Corporate and First Trust

The main advantage of trading using opposite Pimco Corporate and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pimco Corporate 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 Corporate 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.