Correlation Between First Trust and Pacer Swan

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

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

Diversification Opportunities for First Trust and Pacer Swan

0.99

Correlation Coefficient

First Trust  Pacer Swan

No risk reduction

The 3 months correlation between First and Pacer is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange and Pacer Swan SOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Swan SOS and First Trust 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 First Trust Exchange are associated (or correlated) with Pacer Swan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Swan SOS has no effect on the direction of First Trust i.e., First Trust and Pacer Swan go up and down completely randomly.

Pair Corralation between First Trust and Pacer Swan

Given the investment horizon of 90 days First Trust is expected to generate 1.21 times less return on investment than Pacer Swan. In addition to that, First Trust is 1.41 times more volatile than Pacer Swan SOS. It trades about 0.18 of its total potential returns per unit of risk. Pacer Swan SOS is currently generating about 0.3 per unit of volatility. If you would invest  3,281  in Pacer Swan SOS on September 12, 2024 and sell it today you would earn a total of  27.50  from holding Pacer Swan SOS or generate 0.84% return on investment over 90 days.

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

First Trust Exchange  vs.  Pacer Swan SOS

First Trust Exchange

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacer Swan SOS

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Swan SOS are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Pacer Swan is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Pacer Swan

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

The idea behind First Trust Exchange and Pacer Swan SOS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.