Correlation Between Pacer Small and Pacer Cash

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

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

Diversification Opportunities for Pacer Small and Pacer Cash

0.82

Correlation Coefficient

Pacer Small  Pacer Cash

Very poor diversification

The 3 months correlation between Pacer and Pacer is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Small Cap and Pacer Cash Cows in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Cash Cows and Pacer Small 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 Small Cap are associated (or correlated) with Pacer Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Cash Cows has no effect on the direction of Pacer Small i.e., Pacer Small and Pacer Cash go up and down completely randomly.

Pair Corralation between Pacer Small and Pacer Cash

Given the investment horizon of 90 days Pacer Small is expected to generate 3.12 times less return on investment than Pacer Cash. In addition to that, Pacer Small is 1.3 times more volatile than Pacer Cash Cows. It trades about 0.04 of its total potential returns per unit of risk. Pacer Cash Cows is currently generating about 0.17 per unit of volatility. If you would invest  4,480  in Pacer Cash Cows on September 15, 2024 and sell it today you would earn a total of  468.00  from holding Pacer Cash Cows or generate 10.45% return on investment over 90 days.

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

Pacer Small Cap  vs.  Pacer Cash Cows

Pacer Small Cap

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Small Cap are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pacer Cash Cows

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Cash Cows are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Pacer Cash may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pacer Small and Pacer Cash

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

The idea behind Pacer Small Cap and Pacer Cash Cows 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.