Correlation Between First Trust and Pacer Pacific

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

By analyzing existing cross correlation between First Trust Senior and Pacer Pacific Asset, you can compare the effects of market volatilities on First Trust and Pacer Pacific 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 Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Pacer Pacific.

Diversification Opportunities for First Trust and Pacer Pacific

0.72

Correlation Coefficient

First Trust  Pacer Pacific

Poor diversification

The 3 months correlation between First and Pacer is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Pacer Pacific Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Pacific Asset 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 Senior are associated (or correlated) with Pacer Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Pacific Asset has no effect on the direction of First Trust i.e., First Trust and Pacer Pacific go up and down completely randomly.

Pair Corralation between First Trust and Pacer Pacific

Given the investment horizon of 90 days First Trust Senior is expected to generate 0.67 times more return on investment than Pacer Pacific. However, First Trust Senior is 1.49 times less risky than Pacer Pacific. It trades about 0.14 of its potential returns per unit of risk. Pacer Pacific Asset is currently generating about 0.01 per unit of risk. If you would invest  4,548  in First Trust Senior on December 28, 2024 and sell it today you would earn a total of  27.00  from holding First Trust Senior or generate 0.59% return on investment over 90 days.

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

First Trust Senior  vs.  Pacer Pacific Asset

First Trust Senior

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pacer Pacific Asset

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer Pacific Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pacer Pacific is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and Pacer Pacific

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

The idea behind First Trust Senior and Pacer Pacific Asset 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.