Correlation Between Pacer Funds and Franklin Templeton

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

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

Diversification Opportunities for Pacer Funds and Franklin Templeton

-0.65

Correlation Coefficient

Pacer Funds  Franklin Templeton

Excellent diversification

The 3 months correlation between Pacer and Franklin is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Funds Trust and Franklin Templeton ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton ETF and Pacer Funds 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 Funds Trust are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton ETF has no effect on the direction of Pacer Funds i.e., Pacer Funds and Franklin Templeton go up and down completely randomly.

Pair Corralation between Pacer Funds and Franklin Templeton

Given the investment horizon of 90 days Pacer Funds Trust is expected to generate 1.64 times more return on investment than Franklin Templeton. However, Pacer Funds is 1.64 times more volatile than Franklin Templeton ETF. It trades about 0.11 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about 0.04 per unit of risk. If you would invest  2,295  in Pacer Funds Trust on October 4, 2024 and sell it today you would earn a total of  2,757  from holding Pacer Funds Trust or generate 120.13% return on investment over 90 days.

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

Pacer Funds Trust  vs.  Franklin Templeton ETF

Pacer Funds Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Funds Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Pacer Funds may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Franklin Templeton ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Templeton ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Pacer Funds and Franklin Templeton

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

The idea behind Pacer Funds Trust and Franklin Templeton ETF 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.