Correlation Between Pacer CFRA and Pacer Trendpilot

Can any of the company-specific risk be diversified away by investing in both Pacer CFRA 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 CFRA 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 CFRA Stovall Equal and Pacer Trendpilot Bond, you can compare the effects of market volatilities on Pacer CFRA 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 CFRA with a short position of Pacer Trendpilot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer CFRA and Pacer Trendpilot.

Diversification Opportunities for Pacer CFRA and Pacer Trendpilot

0.65

Correlation Coefficient

Pacer CFRA  Pacer Trendpilot

Poor diversification

The 3 months correlation between Pacer and Pacer is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pacer CFRA Stovall Equal and Pacer Trendpilot Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Trendpilot Bond 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 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 Bond has no effect on the direction of Pacer CFRA i.e., Pacer CFRA and Pacer Trendpilot go up and down completely randomly.

Pair Corralation between Pacer CFRA and Pacer Trendpilot

Given the investment horizon of 90 days Pacer CFRA is expected to generate 1.18 times less return on investment than Pacer Trendpilot. In addition to that, Pacer CFRA is 1.94 times more volatile than Pacer Trendpilot Bond. It trades about 0.02 of its total potential returns per unit of risk. Pacer Trendpilot Bond is currently generating about 0.06 per unit of volatility. If you would invest  1,783  in Pacer Trendpilot Bond on October 9, 2024 and sell it today you would earn a total of  229.50  from holding Pacer Trendpilot Bond or generate 12.87% return on investment over 90 days.

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

Pacer CFRA Stovall Equal  vs.  Pacer Trendpilot Bond

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 Trendpilot Bond

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Trendpilot Bond are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Pacer Trendpilot 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 CFRA and Pacer Trendpilot

The main advantage of trading using opposite Pacer CFRA and Pacer Trendpilot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer CFRA 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 CFRA Stovall Equal and Pacer Trendpilot Bond 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.