Correlation Between WisdomTree Emerging and Pacer Funds

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

By analyzing existing cross correlation between WisdomTree Emerging Markets and Pacer Funds Trust, you can compare the effects of market volatilities on WisdomTree Emerging and Pacer Funds 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 WisdomTree Emerging with a short position of Pacer Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and Pacer Funds.

Diversification Opportunities for WisdomTree Emerging and Pacer Funds

-0.26

Correlation Coefficient

WisdomTree Emerging  Pacer Funds

Very good diversification

The 3 months correlation between WisdomTree and Pacer is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and Pacer Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Funds Trust and WisdomTree Emerging 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 WisdomTree Emerging Markets are associated (or correlated) with Pacer Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Funds Trust has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and Pacer Funds go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and Pacer Funds

Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to under-perform the Pacer Funds. In addition to that, WisdomTree Emerging is 1.15 times more volatile than Pacer Funds Trust. It trades about -0.04 of its total potential returns per unit of risk. Pacer Funds Trust is currently generating about 0.1 per unit of volatility. If you would invest  1,899  in Pacer Funds Trust on December 21, 2024 and sell it today you would earn a total of  90.90  from holding Pacer Funds Trust or generate 4.79% return on investment over 90 days.

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

WisdomTree Emerging Markets  vs.  Pacer Funds Trust

WisdomTree Emerging

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, WisdomTree Emerging is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacer Funds Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Funds Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Pacer Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WisdomTree Emerging and Pacer Funds

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

The idea behind WisdomTree Emerging Markets and Pacer Funds Trust 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.