Correlation Between Pacer BlueStar and Pacer Lunt

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

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

Diversification Opportunities for Pacer BlueStar and Pacer Lunt

0.43

Correlation Coefficient

Pacer BlueStar  Pacer Lunt

Very weak diversification

The 3 months correlation between Pacer and Pacer is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Pacer BlueStar Engineering and Pacer Lunt MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Lunt MidCap and Pacer BlueStar 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 BlueStar Engineering are associated (or correlated) with Pacer Lunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Lunt MidCap has no effect on the direction of Pacer BlueStar i.e., Pacer BlueStar and Pacer Lunt go up and down completely randomly.

Pair Corralation between Pacer BlueStar and Pacer Lunt

Given the investment horizon of 90 days Pacer BlueStar Engineering is expected to generate 1.36 times more return on investment than Pacer Lunt. However, Pacer BlueStar is 1.36 times more volatile than Pacer Lunt MidCap. It trades about 0.01 of its potential returns per unit of risk. Pacer Lunt MidCap is currently generating about -0.13 per unit of risk. If you would invest  2,174  in Pacer BlueStar Engineering on December 19, 2024 and sell it today you would earn a total of  6.00  from holding Pacer BlueStar Engineering or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Pacer BlueStar Engineering  vs.  Pacer Lunt MidCap

Pacer BlueStar Engin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer BlueStar Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Pacer BlueStar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacer Lunt MidCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer Lunt MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Pacer BlueStar and Pacer Lunt

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

The idea behind Pacer BlueStar Engineering and Pacer Lunt MidCap 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.