Correlation Between Pacer Cash and Aris Water

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

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

Diversification Opportunities for Pacer Cash and Aris Water

-0.28

Correlation Coefficient

Pacer Cash  Aris Water

Very good diversification

The 3 months correlation between Pacer and Aris is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Cash Cows and Aris Water Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Water Solutions and Pacer Cash 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 Cash Cows are associated (or correlated) with Aris Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Water Solutions has no effect on the direction of Pacer Cash i.e., Pacer Cash and Aris Water go up and down completely randomly.

Pair Corralation between Pacer Cash and Aris Water

Given the investment horizon of 90 days Pacer Cash Cows is expected to under-perform the Aris Water. But the etf apears to be less risky and, when comparing its historical volatility, Pacer Cash Cows is 5.25 times less risky than Aris Water. The etf trades about -0.04 of its potential returns per unit of risk. The Aris Water Solutions is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,522  in Aris Water Solutions on December 26, 2024 and sell it today you would earn a total of  742.00  from holding Aris Water Solutions or generate 29.42% return on investment over 90 days.

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

Pacer Cash Cows  vs.  Aris Water Solutions

Pacer Cash Cows

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer Cash Cows has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Pacer Cash is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aris Water Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacer Cash and Aris Water

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

The idea behind Pacer Cash Cows and Aris Water Solutions 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.