Correlation Between Pacer Trendpilot and Pacer CFRA

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

By analyzing existing cross correlation between Pacer Trendpilot 100 and Pacer CFRA Stovall Equal, you can compare the effects of market volatilities on Pacer Trendpilot and Pacer CFRA 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 Trendpilot with a short position of Pacer CFRA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Trendpilot and Pacer CFRA.

Diversification Opportunities for Pacer Trendpilot and Pacer CFRA

0.89

Correlation Coefficient

Pacer Trendpilot  Pacer CFRA

Very poor diversification

The 3 months correlation between Pacer and Pacer is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Trendpilot 100 and Pacer CFRA Stovall Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer CFRA Stovall and Pacer Trendpilot 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 Trendpilot 100 are associated (or correlated) with Pacer CFRA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer CFRA Stovall has no effect on the direction of Pacer Trendpilot i.e., Pacer Trendpilot and Pacer CFRA go up and down completely randomly.

Pair Corralation between Pacer Trendpilot and Pacer CFRA

Given the investment horizon of 90 days Pacer Trendpilot 100 is expected to under-perform the Pacer CFRA. But the etf apears to be less risky and, when comparing its historical volatility, Pacer Trendpilot 100 is 1.23 times less risky than Pacer CFRA. The etf trades about -0.08 of its potential returns per unit of risk. The Pacer CFRA Stovall Equal is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,646  in Pacer CFRA Stovall Equal on December 19, 2024 and sell it today you would lose (126.00) from holding Pacer CFRA Stovall Equal or give up 3.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Pacer Trendpilot 100  vs.  Pacer CFRA Stovall Equal

Pacer Trendpilot 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer Trendpilot 100 has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Pacer Trendpilot is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pacer CFRA Stovall

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Pacer Trendpilot and Pacer CFRA

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

The idea behind Pacer Trendpilot 100 and Pacer CFRA Stovall Equal 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.