Correlation Between IShares Trust and Pacer Cash

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

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

Diversification Opportunities for IShares Trust and Pacer Cash

0.8

Correlation Coefficient

IShares Trust  Pacer Cash

Very poor diversification

The 3 months correlation between IShares and Pacer is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust 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 IShares 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 iShares Trust 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 IShares Trust i.e., IShares Trust and Pacer Cash go up and down completely randomly.

Pair Corralation between IShares Trust and Pacer Cash

Given the investment horizon of 90 days IShares Trust is expected to generate 1.73 times less return on investment than Pacer Cash. But when comparing it to its historical volatility, iShares Trust is 1.15 times less risky than Pacer Cash. It trades about 0.01 of its potential returns per unit of risk. Pacer Cash Cows is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,815  in Pacer Cash Cows on December 26, 2024 and sell it today you would earn a total of  32.00  from holding Pacer Cash Cows or generate 0.84% return on investment over 90 days.

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

iShares Trust  vs.  Pacer Cash Cows

iShares Trust

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacer Cash Cows

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Cash Cows are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Pacer Cash is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Trust and Pacer Cash

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

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.