Correlation Between Pimco New and First Trust

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

Diversification Opportunities for Pimco New and First Trust

-0.52

Correlation Coefficient

Pimco New  First Trust

Excellent diversification

The 3 months correlation between Pimco and First is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Pimco New York and First Trust Specialty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Specialty and Pimco New 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 New York 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 Specialty has no effect on the direction of Pimco New i.e., Pimco New and First Trust go up and down completely randomly.

Pair Corralation between Pimco New and First Trust

Considering the 90-day investment horizon Pimco New York is expected to under-perform the First Trust. But the fund apears to be less risky and, when comparing its historical volatility, Pimco New York is 1.31 times less risky than First Trust. The fund trades about -0.08 of its potential returns per unit of risk. The First Trust Specialty is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  400.00  in First Trust Specialty on September 13, 2024 and sell it today you would earn a total of  32.00  from holding First Trust Specialty or generate 8.0% return on investment over 90 days.

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

Pimco New York  vs.  First Trust Specialty

Pimco New York

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco New York has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, Pimco New is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

First Trust Specialty

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Specialty are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pimco New and First Trust

The main advantage of trading using opposite Pimco New and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pimco New 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 New York and First Trust Specialty 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.