Correlation Between Vanguard Mid and Pacer Lunt

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

Diversification Opportunities for Vanguard Mid and Pacer Lunt

0.84

Correlation Coefficient

Vanguard Mid  Pacer Lunt

Very poor diversification

The 3 months correlation between Vanguard and Pacer is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index 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 Mid 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 Mid Cap Index 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 Mid i.e., Vanguard Mid and Pacer Lunt go up and down completely randomly.

Pair Corralation between Vanguard Mid and Pacer Lunt

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to generate 0.82 times more return on investment than Pacer Lunt. However, Vanguard Mid Cap Index is 1.23 times less risky than Pacer Lunt. It trades about -0.03 of its potential returns per unit of risk. Pacer Lunt MidCap is currently generating about -0.12 per unit of risk. If you would invest  26,683  in Vanguard Mid Cap Index on December 20, 2024 and sell it today you would lose (482.00) from holding Vanguard Mid Cap Index or give up 1.81% of portfolio value over 90 days.

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

Vanguard Mid Cap Index  vs.  Pacer Lunt MidCap

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pacer Lunt MidCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer Lunt MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's primary 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 Vanguard Mid and Pacer Lunt

The main advantage of trading using opposite Vanguard Mid and Pacer Lunt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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 Mid Cap Index 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.