Correlation Between First Trust and PIMCO Preferred
Can any of the company-specific risk be diversified away by investing in both First Trust and PIMCO Preferred 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 First Trust and PIMCO Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Preferred and PIMCO Preferred And, you can compare the effects of market volatilities on First Trust and PIMCO Preferred 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 First Trust with a short position of PIMCO Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and PIMCO Preferred.
Diversification Opportunities for First Trust and PIMCO Preferred
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and PIMCO is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Preferred and PIMCO Preferred And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Preferred And and First Trust 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 First Trust Preferred are associated (or correlated) with PIMCO Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Preferred And has no effect on the direction of First Trust i.e., First Trust and PIMCO Preferred go up and down completely randomly.
Pair Corralation between First Trust and PIMCO Preferred
Considering the 90-day investment horizon First Trust Preferred is expected to under-perform the PIMCO Preferred. In addition to that, First Trust is 1.26 times more volatile than PIMCO Preferred And. It trades about -0.05 of its total potential returns per unit of risk. PIMCO Preferred And is currently generating about 0.16 per unit of volatility. If you would invest 5,077 in PIMCO Preferred And on August 30, 2024 and sell it today you would earn a total of 38.00 from holding PIMCO Preferred And or generate 0.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Trust Preferred vs. PIMCO Preferred And
Performance |
| Timeline |
| First Trust Preferred |
| PIMCO Preferred And |
First Trust and PIMCO Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and PIMCO Preferred
The main advantage of trading using opposite First Trust and PIMCO Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, PIMCO Preferred 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 PIMCO Preferred will offset losses from the drop in PIMCO Preferred's long position.| First Trust vs. Invesco Variable Rate | First Trust vs. VanEck Preferred Securities | First Trust vs. First Trust Tactical | First Trust vs. First Trust Senior |
| PIMCO Preferred vs. iShares Preferred and | PIMCO Preferred vs. First Trust Preferred | PIMCO Preferred vs. Global X Preferred | PIMCO Preferred vs. Invesco Variable Rate |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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