Correlation Between Vanguard Value and Pacer Lunt

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

Diversification Opportunities for Vanguard Value and Pacer Lunt

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Vanguard and Pacer is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Factor and Pacer Lunt MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Lunt MidCap 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 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 MidCap has no effect on the direction of Vanguard Value i.e., Vanguard Value and Pacer Lunt go up and down completely randomly.

Pair Corralation between Vanguard Value and Pacer Lunt

Given the investment horizon of 90 days Vanguard Value Factor is expected to under-perform the Pacer Lunt. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Value Factor is 1.2 times less risky than Pacer Lunt. The etf trades about -0.28 of its potential returns per unit of risk. The Pacer Lunt MidCap is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  4,959  in Pacer Lunt MidCap on October 7, 2024 and sell it today you would lose (230.00) from holding Pacer Lunt MidCap or give up 4.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard Value Factor  vs.  Pacer Lunt MidCap

 Performance 
       Timeline  
Vanguard Value Factor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 Lunt MidCap 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Lunt MidCap are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Pacer Lunt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Value and Pacer Lunt Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Value and Pacer Lunt

The main advantage of trading using opposite Vanguard Value and Pacer Lunt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value 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 Vanguard Value Factor and Pacer Lunt MidCap 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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