Correlation Between First Trust and PIMCO ETF
Can any of the company-specific risk be diversified away by investing in both First Trust and PIMCO ETF 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 ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Enhanced and PIMCO ETF Trust, you can compare the effects of market volatilities on First Trust and PIMCO ETF 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 ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and PIMCO ETF.
Diversification Opportunities for First Trust and PIMCO ETF
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between First and PIMCO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and PIMCO ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO ETF Trust 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 Enhanced are associated (or correlated) with PIMCO ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO ETF Trust has no effect on the direction of First Trust i.e., First Trust and PIMCO ETF go up and down completely randomly.
Pair Corralation between First Trust and PIMCO ETF
Given the investment horizon of 90 days First Trust Enhanced is expected to generate 1.16 times more return on investment than PIMCO ETF. However, First Trust is 1.16 times more volatile than PIMCO ETF Trust. It trades about 0.64 of its potential returns per unit of risk. PIMCO ETF Trust is currently generating about 0.68 per unit of risk. If you would invest 5,823 in First Trust Enhanced on September 5, 2024 and sell it today you would earn a total of 159.00 from holding First Trust Enhanced or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. PIMCO ETF Trust
Performance |
| Timeline |
| First Trust Enhanced |
| PIMCO ETF Trust |
First Trust and PIMCO ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and PIMCO ETF
The main advantage of trading using opposite First Trust and PIMCO ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, PIMCO ETF 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 ETF will offset losses from the drop in PIMCO ETF's long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW | First Trust vs. First Trust Tactical |
| PIMCO ETF vs. Global X Funds | PIMCO ETF vs. US Treasury 12 | PIMCO ETF vs. Tidal Trust II | PIMCO ETF vs. Franklin Liberty Treasury |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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