Correlation Between IShares Europe and Pacer Trendpilot

Can any of the company-specific risk be diversified away by investing in both IShares Europe 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 Europe 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 Europe ETF and Pacer Trendpilot European, you can compare the effects of market volatilities on IShares Europe 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 Europe with a short position of Pacer Trendpilot. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Europe and Pacer Trendpilot.

Diversification Opportunities for IShares Europe and Pacer Trendpilot

0.99

Correlation Coefficient

IShares Europe  Pacer Trendpilot

No risk reduction

The 3 months correlation between IShares and Pacer is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Europe ETF and Pacer Trendpilot European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Trendpilot European and IShares Europe 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 Europe ETF 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 European has no effect on the direction of IShares Europe i.e., IShares Europe and Pacer Trendpilot go up and down completely randomly.

Pair Corralation between IShares Europe and Pacer Trendpilot

Considering the 90-day investment horizon IShares Europe is expected to generate 1.16 times less return on investment than Pacer Trendpilot. But when comparing it to its historical volatility, iShares Europe ETF is 1.14 times less risky than Pacer Trendpilot. It trades about 0.22 of its potential returns per unit of risk. Pacer Trendpilot European is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Pacer Trendpilot European on December 28, 2024 and sell it today you would earn a total of  366.43  from holding Pacer Trendpilot European or generate 15.27% return on investment over 90 days.

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

iShares Europe ETF  vs.  Pacer Trendpilot European

iShares Europe ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Europe ETF are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, IShares Europe showed solid returns over the last few months and may actually be approaching a breakup point.

Pacer Trendpilot European

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Trendpilot European are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Pacer Trendpilot unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Europe and Pacer Trendpilot

The main advantage of trading using opposite IShares Europe and Pacer Trendpilot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Europe 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 Europe ETF and Pacer Trendpilot European 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 Global Correlations module to find global opportunities by holding instruments from different markets.