Correlation Between Pacer CFRA and Pacer Lunt

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

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

Diversification Opportunities for Pacer CFRA and Pacer Lunt

0.86

Correlation Coefficient

Pacer CFRA  Pacer Lunt

Very poor diversification

The 3 months correlation between Pacer and Pacer is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Pacer CFRA Stovall Equal and Pacer Lunt Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Lunt Large and Pacer CFRA 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 CFRA Stovall Equal are associated (or correlated) with Pacer Lunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Lunt Large has no effect on the direction of Pacer CFRA i.e., Pacer CFRA and Pacer Lunt go up and down completely randomly.

Pair Corralation between Pacer CFRA and Pacer Lunt

Given the investment horizon of 90 days Pacer CFRA Stovall Equal is expected to generate 0.89 times more return on investment than Pacer Lunt. However, Pacer CFRA Stovall Equal is 1.12 times less risky than Pacer Lunt. It trades about 0.02 of its potential returns per unit of risk. Pacer Lunt Large is currently generating about 0.0 per unit of risk. If you would invest  3,376  in Pacer CFRA Stovall Equal on October 9, 2024 and sell it today you would earn a total of  312.00  from holding Pacer CFRA Stovall Equal or generate 9.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Pacer CFRA Stovall Equal  vs.  Pacer Lunt Large

Pacer CFRA Stovall

Risk-Adjusted Performance

0 of 100

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.

Pacer Lunt Large

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Lunt Large are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Pacer Lunt is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Pacer CFRA and Pacer Lunt

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

The idea behind Pacer CFRA Stovall Equal and Pacer Lunt Large 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.