Correlation Between Pacer Developed and Pacer Cash

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

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

Diversification Opportunities for Pacer Developed and Pacer Cash

-0.44

Correlation Coefficient

Pacer Developed  Pacer Cash

Very good diversification

The 3 months correlation between Pacer and Pacer is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Developed Markets and Pacer Cash Cows in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Cash Cows and Pacer Developed 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 Pacer Developed Markets are associated (or correlated) with Pacer Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Cash Cows has no effect on the direction of Pacer Developed i.e., Pacer Developed and Pacer Cash go up and down completely randomly.

Pair Corralation between Pacer Developed and Pacer Cash

Given the investment horizon of 90 days Pacer Developed is expected to generate 1.99 times less return on investment than Pacer Cash. But when comparing it to its historical volatility, Pacer Developed Markets is 1.22 times less risky than Pacer Cash. It trades about 0.04 of its potential returns per unit of risk. Pacer Cash Cows is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,549  in Pacer Cash Cows on September 14, 2024 and sell it today you would earn a total of  1,398  from holding Pacer Cash Cows or generate 39.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Pacer Developed Markets  vs.  Pacer Cash Cows

Pacer Developed Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer Developed Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Pacer Developed is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pacer Cash Cows

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Cash Cows are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Pacer Cash may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pacer Developed and Pacer Cash

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

The idea behind Pacer Developed Markets and Pacer Cash Cows 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.