Correlation Between Pacer Lunt and IShares ESG

Can any of the company-specific risk be diversified away by investing in both Pacer Lunt and IShares ESG 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 ESG 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 ESG Aggregate, you can compare the effects of market volatilities on Pacer Lunt and IShares ESG 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 ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Lunt and IShares ESG.

Diversification Opportunities for Pacer Lunt and IShares ESG

0.66

Correlation Coefficient

Pacer Lunt  IShares ESG

Poor diversification

The 3 months correlation between Pacer and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Lunt Large and iShares ESG Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aggregate 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aggregate has no effect on the direction of Pacer Lunt i.e., Pacer Lunt and IShares ESG go up and down completely randomly.

Pair Corralation between Pacer Lunt and IShares ESG

Given the investment horizon of 90 days Pacer Lunt is expected to generate 92.45 times less return on investment than IShares ESG. In addition to that, Pacer Lunt is 2.39 times more volatile than iShares ESG Aggregate. It trades about 0.0 of its total potential returns per unit of risk. iShares ESG Aggregate is currently generating about 0.31 per unit of volatility. If you would invest  4,658  in iShares ESG Aggregate on December 2, 2024 and sell it today you would earn a total of  100.00  from holding iShares ESG Aggregate or generate 2.15% return on investment over 90 days.

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

Pacer Lunt Large  vs.  iShares ESG Aggregate

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 ESG Aggregate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aggregate are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pacer Lunt and IShares ESG

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

The idea behind Pacer Lunt Large and iShares ESG Aggregate 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.