Correlation Between Schwab Large and Pacer Global

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

By analyzing existing cross correlation between Schwab Large Cap Growth and Pacer Global Cash, you can compare the effects of market volatilities on Schwab Large and Pacer Global 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 Schwab Large with a short position of Pacer Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Large and Pacer Global.

Diversification Opportunities for Schwab Large and Pacer Global

0.15

Correlation Coefficient

Schwab Large  Pacer Global

Average diversification

The 3 months correlation between Schwab and Pacer is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Large Cap Growth and Pacer Global Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Global Cash and Schwab Large 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 Schwab Large Cap Growth are associated (or correlated) with Pacer Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Global Cash has no effect on the direction of Schwab Large i.e., Schwab Large and Pacer Global go up and down completely randomly.

Pair Corralation between Schwab Large and Pacer Global

Given the investment horizon of 90 days Schwab Large Cap Growth is expected to under-perform the Pacer Global. In addition to that, Schwab Large is 1.79 times more volatile than Pacer Global Cash. It trades about -0.01 of its total potential returns per unit of risk. Pacer Global Cash is currently generating about 0.09 per unit of volatility. If you would invest  3,508  in Pacer Global Cash on November 28, 2024 and sell it today you would earn a total of  125.00  from holding Pacer Global Cash or generate 3.56% return on investment over 90 days.

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

Schwab Large Cap Growth  vs.  Pacer Global Cash

Schwab Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab Large Cap Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Schwab Large is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pacer Global Cash

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Global Cash are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Pacer Global is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Schwab Large and Pacer Global

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

The idea behind Schwab Large Cap Growth and Pacer Global Cash 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.