Correlation Between IShares Real and Pacer Benchmark

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

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

Diversification Opportunities for IShares Real and Pacer Benchmark

0.95

Correlation Coefficient

IShares Real  Pacer Benchmark

Almost no diversification

The 3 months correlation between IShares and Pacer is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Real Estate and Pacer Benchmark Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Benchmark Indu and IShares Real 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 Real Estate are associated (or correlated) with Pacer Benchmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Benchmark Indu has no effect on the direction of IShares Real i.e., IShares Real and Pacer Benchmark go up and down completely randomly.

Pair Corralation between IShares Real and Pacer Benchmark

Considering the 90-day investment horizon IShares Real is expected to generate 1.36 times less return on investment than Pacer Benchmark. But when comparing it to its historical volatility, iShares Real Estate is 1.0 times less risky than Pacer Benchmark. It trades about 0.05 of its potential returns per unit of risk. Pacer Benchmark Industrial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,514  in Pacer Benchmark Industrial on December 27, 2024 and sell it today you would earn a total of  138.00  from holding Pacer Benchmark Industrial or generate 3.93% return on investment over 90 days.

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

iShares Real Estate  vs.  Pacer Benchmark Industrial

iShares Real Estate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Real is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pacer Benchmark Indu

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Benchmark Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Pacer Benchmark 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 IShares Real and Pacer Benchmark

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

The idea behind iShares Real Estate and Pacer Benchmark Industrial 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 Anywhere module to track or share privately all of your investments from the convenience of any device.