Correlation Between Pacer Small and Hartford Multifactor

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

Diversification Opportunities for Pacer Small and Hartford Multifactor

0.73

Correlation Coefficient

Pacer Small  Hartford Multifactor

Poor diversification

The 3 months correlation between Pacer and Hartford is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Small Cap and Hartford Multifactor Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Multifactor 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 Hartford Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Multifactor has no effect on the direction of Pacer Small i.e., Pacer Small and Hartford Multifactor go up and down completely randomly.

Pair Corralation between Pacer Small and Hartford Multifactor

Given the investment horizon of 90 days Pacer Small Cap is expected to generate 1.12 times more return on investment than Hartford Multifactor. However, Pacer Small is 1.12 times more volatile than Hartford Multifactor Small. It trades about 0.04 of its potential returns per unit of risk. Hartford Multifactor Small is currently generating about 0.04 per unit of risk. If you would invest  3,654  in Pacer Small Cap on October 10, 2024 and sell it today you would earn a total of  774.00  from holding Pacer Small Cap or generate 21.18% return on investment over 90 days.

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

Pacer Small Cap  vs.  Hartford Multifactor Small

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.

Hartford Multifactor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Multifactor Small are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Hartford Multifactor is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pacer Small and Hartford Multifactor

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

The idea behind Pacer Small Cap and Hartford Multifactor Small 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..