Correlation Between Pacer Financial and CHIM

Can any of the company-specific risk be diversified away by investing in both Pacer Financial and CHIM 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 Pacer Financial and CHIM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pacer Financial and CHIM, you can compare the effects of market volatilities on Pacer Financial and CHIM 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 Pacer Financial with a short position of CHIM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Financial and CHIM.

Diversification Opportunities for Pacer Financial and CHIM

-0.07

Correlation Coefficient

Pacer Financial  CHIM

Good diversification

The 3 months correlation between Pacer and CHIM is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Financial and CHIM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIM and Pacer Financial 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 Pacer Financial are associated (or correlated) with CHIM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHIM has no effect on the direction of Pacer Financial i.e., Pacer Financial and CHIM go up and down completely randomly.

Pair Corralation between Pacer Financial and CHIM

Given the investment horizon of 90 days Pacer Financial is expected to generate 3.62 times less return on investment than CHIM. But when comparing it to its historical volatility, Pacer Financial is 1.09 times less risky than CHIM. It trades about 0.03 of its potential returns per unit of risk. CHIM is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,558  in CHIM on September 19, 2024 and sell it today you would earn a total of  86.00  from holding CHIM or generate 5.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	11.4%
Values	Daily Returns

Pacer Financial  vs.  CHIM

Pacer Financial

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Pacer Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, Pacer Financial showed solid returns over the last few months and may actually be approaching a breakup point.

CHIM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHIM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, CHIM is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pacer Financial and CHIM

The main advantage of trading using opposite Pacer Financial and CHIM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer Financial position performs unexpectedly, CHIM 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 CHIM will offset losses from the drop in CHIM's long position.

The idea behind Pacer Financial and CHIM 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.