Correlation Between IShares Core and Pacer Financial

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

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

Diversification Opportunities for IShares Core and Pacer Financial

0.8

Correlation Coefficient

IShares Core  Pacer Financial

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 Core SP and Pacer Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Financial and IShares Core 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 Core SP are associated (or correlated) with Pacer Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Financial has no effect on the direction of IShares Core i.e., IShares Core and Pacer Financial go up and down completely randomly.

Pair Corralation between IShares Core and Pacer Financial

Considering the 90-day investment horizon iShares Core SP is expected to generate 2.18 times more return on investment than Pacer Financial. However, IShares Core is 2.18 times more volatile than Pacer Financial. It trades about 0.17 of its potential returns per unit of risk. Pacer Financial is currently generating about 0.2 per unit of risk. If you would invest  56,232  in iShares Core SP on September 18, 2024 and sell it today you would earn a total of  4,276  from holding iShares Core SP or generate 7.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	29.69%
Values	Daily Returns

iShares Core SP  vs.  Pacer Financial

iShares Core SP

Risk-Adjusted Performance

13 of 100

Good

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

Pacer Financial

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with IShares Core and Pacer Financial

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

The idea behind iShares Core SP and Pacer Financial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..