Correlation Between First Trust and Pacer WealthShield

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

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

Diversification Opportunities for First Trust and Pacer WealthShield

-0.42

Correlation Coefficient

First Trust  Pacer WealthShield

Very good diversification

The 3 months correlation between First and Pacer is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Pacer WealthShield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer WealthShield 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 Dorsey are associated (or correlated) with Pacer WealthShield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer WealthShield has no effect on the direction of First Trust i.e., First Trust and Pacer WealthShield go up and down completely randomly.

Pair Corralation between First Trust and Pacer WealthShield

Considering the 90-day investment horizon First Trust Dorsey is expected to generate 1.37 times more return on investment than Pacer WealthShield. However, First Trust is 1.37 times more volatile than Pacer WealthShield. It trades about 0.03 of its potential returns per unit of risk. Pacer WealthShield is currently generating about 0.04 per unit of risk. If you would invest  3,429  in First Trust Dorsey on September 4, 2024 and sell it today you would earn a total of  400.00  from holding First Trust Dorsey or generate 11.67% return on investment over 90 days.

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

First Trust Dorsey  vs.  Pacer WealthShield

First Trust Dorsey

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dorsey are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pacer WealthShield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer WealthShield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pacer WealthShield 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 WealthShield

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

The idea behind First Trust Dorsey and Pacer WealthShield 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.