Correlation Between Pimco Global and First Trust

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

Diversification Opportunities for Pimco Global and First Trust

0.54

Correlation Coefficient

Pimco Global  First Trust

Very weak diversification

The 3 months correlation between Pimco and First is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Global Stocksplus 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 Global 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 Global Stocksplus 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 Global i.e., Pimco Global and First Trust go up and down completely randomly.

Pair Corralation between Pimco Global and First Trust

Considering the 90-day investment horizon Pimco Global Stocksplus is expected to generate 1.29 times more return on investment than First Trust. However, Pimco Global is 1.29 times more volatile than First Trust Mortgage. It trades about 0.07 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  555.00  in Pimco Global Stocksplus on September 14, 2024 and sell it today you would earn a total of  248.00  from holding Pimco Global Stocksplus or generate 44.68% return on investment over 90 days.

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

Pimco Global Stocksplus  vs.  First Trust Mortgage

Pimco Global Stocksplus

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Global Stocksplus are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively invariable technical and fundamental indicators, Pimco Global is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail 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 Global and First Trust

The main advantage of trading using opposite Pimco Global and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pimco Global 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 Global Stocksplus 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.