Correlation Between Vanguard Value and Pacer Cash

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

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

Diversification Opportunities for Vanguard Value and Pacer Cash

0.95

Correlation Coefficient

Vanguard Value  Pacer Cash

Almost no diversification

The 3 months correlation between Vanguard and Pacer is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Factor and Pacer Cash Cows in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Cash Cows and Vanguard Value 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 Vanguard Value Factor are associated (or correlated) with Pacer Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Cash Cows has no effect on the direction of Vanguard Value i.e., Vanguard Value and Pacer Cash go up and down completely randomly.

Pair Corralation between Vanguard Value and Pacer Cash

Given the investment horizon of 90 days Vanguard Value Factor is expected to generate 0.78 times more return on investment than Pacer Cash. However, Vanguard Value Factor is 1.29 times less risky than Pacer Cash. It trades about -0.04 of its potential returns per unit of risk. Pacer Cash Cows is currently generating about -0.06 per unit of risk. If you would invest  11,807  in Vanguard Value Factor on December 22, 2024 and sell it today you would lose (276.00) from holding Vanguard Value Factor or give up 2.34% of portfolio value over 90 days.

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

Vanguard Value Factor  vs.  Pacer Cash Cows

Vanguard Value Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Value Factor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pacer Cash Cows

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer Cash Cows has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Pacer Cash is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard Value and Pacer Cash

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

The idea behind Vanguard Value Factor and Pacer Cash Cows 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.