Correlation Between Pacer Cash and Pacer Small

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

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

Diversification Opportunities for Pacer Cash and Pacer Small

0.74

Correlation Coefficient

Pacer Cash  Pacer Small

Poor diversification

The 3 months correlation between Pacer and Pacer is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Cash Cows and Pacer Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Small Cap and Pacer Cash 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 Cash Cows are associated (or correlated) with Pacer Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Small Cap has no effect on the direction of Pacer Cash i.e., Pacer Cash and Pacer Small go up and down completely randomly.

Pair Corralation between Pacer Cash and Pacer Small

Considering the 90-day investment horizon Pacer Cash Cows is expected to generate 1.22 times more return on investment than Pacer Small. However, Pacer Cash is 1.22 times more volatile than Pacer Small Cap. It trades about -0.22 of its potential returns per unit of risk. Pacer Small Cap is currently generating about -0.3 per unit of risk. If you would invest  4,998  in Pacer Cash Cows on October 9, 2024 and sell it today you would lose (244.00) from holding Pacer Cash Cows or give up 4.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Pacer Cash Cows  vs.  Pacer Small Cap

Pacer Cash Cows

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Cash Cows are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Pacer Cash is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pacer Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Pacer Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pacer Cash and Pacer Small

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

The idea behind Pacer Cash Cows and Pacer Small Cap 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..