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 Large, 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

0.9

Correlation Coefficient

Pacer CFRA  Pacer Trendpilot

Almost no diversification

The 3 months correlation between Pacer and Pacer is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Pacer CFRA Stovall Equal and Pacer Trendpilot Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Trendpilot 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 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 Large 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 Stovall Equal is expected to under-perform the Pacer Trendpilot. But the etf apears to be less risky and, when comparing its historical volatility, Pacer CFRA Stovall Equal is 1.02 times less risky than Pacer Trendpilot. The etf trades about -0.16 of its potential returns per unit of risk. The Pacer Trendpilot Large is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  5,495  in Pacer Trendpilot Large on December 13, 2024 and sell it today you would lose (400.00) from holding Pacer Trendpilot Large or give up 7.28% of portfolio value over 90 days.

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

Pacer CFRA Stovall Equal  vs.  Pacer Trendpilot Large

Pacer CFRA Stovall

Risk-Adjusted Performance

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 latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pacer Trendpilot Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer Trendpilot Large has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund 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 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.