Correlation Between Pacer Lunt and AB Low

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

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

Diversification Opportunities for Pacer Lunt and AB Low

0.56

Correlation Coefficient

Pacer Lunt  AB Low

Very weak diversification

The 3 months correlation between Pacer and LOWV is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Lunt Large and AB Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Low Volatility and Pacer Lunt 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 Lunt Large are associated (or correlated) with AB Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Low Volatility has no effect on the direction of Pacer Lunt i.e., Pacer Lunt and AB Low go up and down completely randomly.

Pair Corralation between Pacer Lunt and AB Low

Given the investment horizon of 90 days Pacer Lunt is expected to generate 23.03 times less return on investment than AB Low. In addition to that, Pacer Lunt is 1.44 times more volatile than AB Low Volatility. It trades about 0.0 of its total potential returns per unit of risk. AB Low Volatility is currently generating about 0.13 per unit of volatility. If you would invest  4,990  in AB Low Volatility on October 25, 2024 and sell it today you would earn a total of  2,262  from holding AB Low Volatility or generate 45.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.72%
Values	Daily Returns

Pacer Lunt Large  vs.  AB Low Volatility

Pacer Lunt Large

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Lunt Large are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Pacer Lunt is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

AB Low Volatility

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AB Low Volatility are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, AB Low is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Pacer Lunt and AB Low

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

The idea behind Pacer Lunt Large and AB Low Volatility 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..