Correlation Between Pacer Small and Pacer Developed

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

Diversification Opportunities for Pacer Small and Pacer Developed

-0.85

Correlation Coefficient

Pacer Small  Pacer Developed

Pay attention - limited upside

The 3 months correlation between Pacer and Pacer is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Small Cap and Pacer Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Developed Markets 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 Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Developed Markets has no effect on the direction of Pacer Small i.e., Pacer Small and Pacer Developed go up and down completely randomly.

Pair Corralation between Pacer Small and Pacer Developed

Given the investment horizon of 90 days Pacer Small Cap is expected to under-perform the Pacer Developed. In addition to that, Pacer Small is 1.4 times more volatile than Pacer Developed Markets. It trades about -0.19 of its total potential returns per unit of risk. Pacer Developed Markets is currently generating about 0.21 per unit of volatility. If you would invest  2,883  in Pacer Developed Markets on December 28, 2024 and sell it today you would earn a total of  305.00  from holding Pacer Developed Markets or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Pacer Small Cap  vs.  Pacer Developed Markets

Pacer Small Cap

Risk-Adjusted Performance

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 weak performance in the last few months, the Etf's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pacer Developed Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Developed Markets are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pacer Developed may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pacer Small and Pacer Developed

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

The idea behind Pacer Small Cap and Pacer Developed Markets 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.