Correlation Between Pacer Cash and IShares Focused

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

Diversification Opportunities for Pacer Cash and IShares Focused

0.84

Correlation Coefficient

Pacer Cash  IShares Focused

Very poor diversification

The 3 months correlation between Pacer and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Cash Cows and iShares Focused Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Focused Value 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 IShares Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Focused Value has no effect on the direction of Pacer Cash i.e., Pacer Cash and IShares Focused go up and down completely randomly.

Pair Corralation between Pacer Cash and IShares Focused

Given the investment horizon of 90 days Pacer Cash Cows is expected to under-perform the IShares Focused. But the etf apears to be less risky and, when comparing its historical volatility, Pacer Cash Cows is 1.05 times less risky than IShares Focused. The etf trades about -0.1 of its potential returns per unit of risk. The iShares Focused Value is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  7,548  in iShares Focused Value on November 28, 2024 and sell it today you would lose (284.00) from holding iShares Focused Value or give up 3.76% of portfolio value over 90 days.

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

Pacer Cash Cows  vs.  iShares Focused Value

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.

iShares Focused Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Focused Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares Focused is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Pacer Cash and IShares Focused

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

The idea behind Pacer Cash Cows and iShares Focused Value 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.