Correlation Between Pacer Small and VictoryShares Small

Can any of the company-specific risk be diversified away by investing in both Pacer Small and VictoryShares 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 Small and VictoryShares Small 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 VictoryShares Small Cap, you can compare the effects of market volatilities on Pacer Small and VictoryShares 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 Small with a short position of VictoryShares Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Small and VictoryShares Small.

Diversification Opportunities for Pacer Small and VictoryShares Small

0.8

Correlation Coefficient

Pacer Small  VictoryShares Small

Very poor diversification

The 3 months correlation between Pacer and VictoryShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Small Cap and VictoryShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares Small Cap 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 VictoryShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares Small Cap has no effect on the direction of Pacer Small i.e., Pacer Small and VictoryShares Small go up and down completely randomly.

Pair Corralation between Pacer Small and VictoryShares Small

Given the investment horizon of 90 days Pacer Small is expected to generate 2.2 times less return on investment than VictoryShares Small. But when comparing it to its historical volatility, Pacer Small Cap is 1.29 times less risky than VictoryShares Small. It trades about 0.15 of its potential returns per unit of risk. VictoryShares Small Cap is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  5,881  in VictoryShares Small Cap on October 20, 2024 and sell it today you would earn a total of  258.00  from holding VictoryShares Small Cap or generate 4.39% 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.  VictoryShares Small Cap

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.

VictoryShares Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares Small Cap are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, VictoryShares Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pacer Small and VictoryShares Small

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

The idea behind Pacer Small Cap and VictoryShares 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.