Correlation Between Pacer Large and US Treasury

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

By analyzing existing cross correlation between Pacer Large Cap and US Treasury 20, you can compare the effects of market volatilities on Pacer Large and US Treasury 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 Large with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Large and US Treasury.

Diversification Opportunities for Pacer Large and US Treasury

-0.66

Correlation Coefficient

Pacer Large  US Treasury

Excellent diversification

The 3 months correlation between Pacer and UTWY is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Large Cap and US Treasury 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 20 and Pacer Large 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 Large Cap are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 20 has no effect on the direction of Pacer Large i.e., Pacer Large and US Treasury go up and down completely randomly.

Pair Corralation between Pacer Large and US Treasury

Given the investment horizon of 90 days Pacer Large Cap is expected to generate 1.64 times more return on investment than US Treasury. However, Pacer Large is 1.64 times more volatile than US Treasury 20. It trades about 0.11 of its potential returns per unit of risk. US Treasury 20 is currently generating about 0.11 per unit of risk. If you would invest  3,249  in Pacer Large Cap on September 14, 2024 and sell it today you would earn a total of  77.00  from holding Pacer Large Cap or generate 2.37% return on investment over 90 days.

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

Pacer Large Cap  vs.  US Treasury 20

Pacer Large Cap

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Large Cap are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pacer Large reported solid returns over the last few months and may actually be approaching a breakup point.

US Treasury 20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Treasury 20 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Pacer Large and US Treasury

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

The idea behind Pacer Large Cap and US Treasury 20 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.