Correlation Between IShares MSCI and Pacer Trendpilot

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

By analyzing existing cross correlation between iShares MSCI EAFE and Pacer Trendpilot International, you can compare the effects of market volatilities on IShares MSCI and Pacer Trendpilot 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 IShares MSCI with a short position of Pacer Trendpilot. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Pacer Trendpilot.

Diversification Opportunities for IShares MSCI and Pacer Trendpilot

0.79

Correlation Coefficient

IShares MSCI  Pacer Trendpilot

Poor diversification

The 3 months correlation between IShares and Pacer is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Pacer Trendpilot International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Trendpilot Int and IShares MSCI 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 iShares MSCI EAFE are associated (or correlated) with Pacer Trendpilot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Trendpilot Int has no effect on the direction of IShares MSCI i.e., IShares MSCI and Pacer Trendpilot go up and down completely randomly.

Pair Corralation between IShares MSCI and Pacer Trendpilot

Considering the 90-day investment horizon iShares MSCI EAFE is expected to generate 1.08 times more return on investment than Pacer Trendpilot. However, IShares MSCI is 1.08 times more volatile than Pacer Trendpilot International. It trades about 0.16 of its potential returns per unit of risk. Pacer Trendpilot International is currently generating about 0.14 per unit of risk. If you would invest  7,561  in iShares MSCI EAFE on December 28, 2024 and sell it today you would earn a total of  685.00  from holding iShares MSCI EAFE or generate 9.06% return on investment over 90 days.

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

iShares MSCI EAFE  vs.  Pacer Trendpilot International

iShares MSCI EAFE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI EAFE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pacer Trendpilot Int

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Trendpilot International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Pacer Trendpilot may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares MSCI and Pacer Trendpilot

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

The idea behind iShares MSCI EAFE and Pacer Trendpilot International 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 Anywhere module to track or share privately all of your investments from the convenience of any device.