Correlation Between First Trust and Pimco Income
Can any of the company-specific risk be diversified away by investing in both First Trust and Pimco Income 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 Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and Pimco Income Strategy, you can compare the effects of market volatilities on First Trust and Pimco Income 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 Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Pimco Income.
Diversification Opportunities for First Trust and Pimco Income
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Pimco is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Pimco Income Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income Strategy 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 Exchange Traded are associated (or correlated) with Pimco Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Income Strategy has no effect on the direction of First Trust i.e., First Trust and Pimco Income go up and down completely randomly.
Pair Corralation between First Trust and Pimco Income
Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 0.06 times more return on investment than Pimco Income. However, First Trust Exchange Traded is 18.05 times less risky than Pimco Income. It trades about 0.89 of its potential returns per unit of risk. Pimco Income Strategy is currently generating about 0.05 per unit of risk. If you would invest 3,016 in First Trust Exchange Traded on September 1, 2024 and sell it today you would earn a total of 17.00 from holding First Trust Exchange Traded or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust Exchange Traded vs. Pimco Income Strategy
Performance |
| Timeline |
| First Trust Exchange |
| Pimco Income Strategy |
First Trust and Pimco Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Pimco Income
The main advantage of trading using opposite First Trust and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Pimco Income 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 Income will offset losses from the drop in Pimco Income's long position.| First Trust vs. FT Vest Equity | First Trust vs. Northern Lights | First Trust vs. Dimensional International High | First Trust vs. Matthews China Discovery |
| Pimco Income vs. PIMCO Access Income | Pimco Income vs. Pimco High Income | Pimco Income vs. Pimco Corporate Income | Pimco Income vs. Pimco Corporate Income |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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