Correlation Between PIMCO ETF and First Trust
Can any of the company-specific risk be diversified away by investing in both PIMCO ETF 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 ETF 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 ETF Trust and First Trust Flexible, you can compare the effects of market volatilities on PIMCO ETF 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 ETF with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO ETF and First Trust.
Diversification Opportunities for PIMCO ETF and First Trust
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PIMCO and First is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO ETF Trust and First Trust Flexible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Flexible and PIMCO ETF 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 ETF Trust 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 Flexible has no effect on the direction of PIMCO ETF i.e., PIMCO ETF and First Trust go up and down completely randomly.
Pair Corralation between PIMCO ETF and First Trust
Given the investment horizon of 90 days PIMCO ETF Trust is expected to generate 0.29 times more return on investment than First Trust. However, PIMCO ETF Trust is 3.49 times less risky than First Trust. It trades about -0.01 of its potential returns per unit of risk. First Trust Flexible is currently generating about -0.02 per unit of risk. If you would invest 4,566 in PIMCO ETF Trust on August 25, 2024 and sell it today you would lose (11.00) from holding PIMCO ETF Trust or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO ETF Trust vs. First Trust Flexible
Performance |
| Timeline |
| PIMCO ETF Trust |
| First Trust Flexible |
PIMCO ETF and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO ETF and First Trust
The main advantage of trading using opposite PIMCO ETF and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO ETF 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.| PIMCO ETF vs. BlackRock Intermediate Muni | PIMCO ETF vs. IQ MacKay Municipal | PIMCO ETF vs. PIMCO Short Term | PIMCO ETF vs. iShares Short Maturity |
| First Trust vs. Franklin Liberty Intermediate | First Trust vs. IQ MacKay Municipal | First Trust vs. Xtrackers Municipal Infrastructure | First Trust vs. Hartford Municipal Opportunities |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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