Correlation Between First Trust and Pacer Funds

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

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

Diversification Opportunities for First Trust and Pacer Funds

-0.36

Correlation Coefficient

First Trust  Pacer Funds

Very good diversification

The 3 months correlation between First and Pacer is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Growth 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 First Trust 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 First Trust Growth 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 First Trust i.e., First Trust and Pacer Funds go up and down completely randomly.

Pair Corralation between First Trust and Pacer Funds

Given the investment horizon of 90 days First Trust Growth is expected to generate 1.01 times more return on investment than Pacer Funds. However, First Trust is 1.01 times more volatile than Pacer Funds Trust. It trades about 0.15 of its potential returns per unit of risk. Pacer Funds Trust is currently generating about -0.02 per unit of risk. If you would invest  3,035  in First Trust Growth on September 12, 2024 and sell it today you would earn a total of  232.00  from holding First Trust Growth or generate 7.64% return on investment over 90 days.

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

First Trust Growth  vs.  Pacer Funds Trust

First Trust Growth

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Growth are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pacer Funds Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer Funds Trust has generated negative risk-adjusted returns adding no value to investors with long positions. 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 First Trust and Pacer Funds

The main advantage of trading using opposite First Trust and Pacer Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Growth 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.