Correlation Between Pacer WealthShield and Pacer Trendpilot

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

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

Diversification Opportunities for Pacer WealthShield and Pacer Trendpilot

0.63

Correlation Coefficient

Pacer WealthShield  Pacer Trendpilot

Poor diversification

The 3 months correlation between Pacer and Pacer is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pacer WealthShield and Pacer Trendpilot 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Trendpilot 100 and Pacer WealthShield 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 WealthShield are associated (or correlated) with Pacer Trendpilot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Trendpilot 100 has no effect on the direction of Pacer WealthShield i.e., Pacer WealthShield and Pacer Trendpilot go up and down completely randomly.

Pair Corralation between Pacer WealthShield and Pacer Trendpilot

Considering the 90-day investment horizon Pacer WealthShield is expected to generate 0.94 times more return on investment than Pacer Trendpilot. However, Pacer WealthShield is 1.06 times less risky than Pacer Trendpilot. It trades about -0.03 of its potential returns per unit of risk. Pacer Trendpilot 100 is currently generating about -0.08 per unit of risk. If you would invest  3,073  in Pacer WealthShield on December 27, 2024 and sell it today you would lose (48.00) from holding Pacer WealthShield or give up 1.56% of portfolio value over 90 days.

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

Pacer WealthShield  vs.  Pacer Trendpilot 100

Pacer WealthShield

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with Pacer WealthShield and Pacer Trendpilot

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

The idea behind Pacer WealthShield and Pacer Trendpilot 100 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.