Correlation Between Vanguard Industrials and Pacer Funds

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

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

Diversification Opportunities for Vanguard Industrials and Pacer Funds

0.8

Correlation Coefficient

Vanguard Industrials  Pacer Funds

Very poor diversification

The 3 months correlation between Vanguard and Pacer is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Industrials Index and Pacer Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Funds Trust and Vanguard Industrials 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 Industrials Index are associated (or correlated) with Pacer Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Funds Trust has no effect on the direction of Vanguard Industrials i.e., Vanguard Industrials and Pacer Funds go up and down completely randomly.

Pair Corralation between Vanguard Industrials and Pacer Funds

Considering the 90-day investment horizon Vanguard Industrials Index is expected to under-perform the Pacer Funds. In addition to that, Vanguard Industrials is 1.02 times more volatile than Pacer Funds Trust. It trades about -0.15 of its total potential returns per unit of risk. Pacer Funds Trust is currently generating about -0.05 per unit of volatility. If you would invest  2,812  in Pacer Funds Trust on November 28, 2024 and sell it today you would lose (80.00) from holding Pacer Funds Trust or give up 2.84% of portfolio value over 90 days.

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

Vanguard Industrials Index  vs.  Pacer Funds Trust

Vanguard Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Industrials Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pacer Funds Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer Funds Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Pacer Funds is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Industrials and Pacer Funds

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

The idea behind Vanguard Industrials Index and Pacer Funds Trust 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.