Correlation Between Pacer Lunt and IShares CMBS

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

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

Diversification Opportunities for Pacer Lunt and IShares CMBS

-0.2

Correlation Coefficient

Pacer Lunt  IShares CMBS

Good diversification

The 3 months correlation between Pacer and IShares is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Lunt Large and iShares CMBS ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares CMBS ETF and Pacer Lunt 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 Lunt Large are associated (or correlated) with IShares CMBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares CMBS ETF has no effect on the direction of Pacer Lunt i.e., Pacer Lunt and IShares CMBS go up and down completely randomly.

Pair Corralation between Pacer Lunt and IShares CMBS

Given the investment horizon of 90 days Pacer Lunt Large is expected to under-perform the IShares CMBS. In addition to that, Pacer Lunt is 4.27 times more volatile than iShares CMBS ETF. It trades about -0.02 of its total potential returns per unit of risk. iShares CMBS ETF is currently generating about 0.14 per unit of volatility. If you would invest  4,687  in iShares CMBS ETF on December 27, 2024 and sell it today you would earn a total of  100.00  from holding iShares CMBS ETF or generate 2.13% return on investment over 90 days.

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

Pacer Lunt Large  vs.  iShares CMBS ETF

Pacer Lunt Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer Lunt Large has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Pacer Lunt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares CMBS ETF

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares CMBS ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, IShares CMBS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pacer Lunt and IShares CMBS

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

The idea behind Pacer Lunt Large and iShares CMBS ETF 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.