Correlation Between First Trust and Pacer Swan
Can any of the company-specific risk be diversified away by investing in both First Trust and Pacer Swan 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 First Trust and Pacer Swan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Cboe and Pacer Swan SOS, you can compare the effects of market volatilities on First Trust and Pacer Swan 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 First Trust with a short position of Pacer Swan. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Pacer Swan.
Diversification Opportunities for First Trust and Pacer Swan
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between First and Pacer is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Cboe and Pacer Swan SOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Swan SOS and First Trust 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 First Trust Cboe are associated (or correlated) with Pacer Swan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Swan SOS has no effect on the direction of First Trust i.e., First Trust and Pacer Swan go up and down completely randomly.
Pair Corralation between First Trust and Pacer Swan
Given the investment horizon of 90 days First Trust is expected to generate 1.22 times less return on investment than Pacer Swan. But when comparing it to its historical volatility, First Trust Cboe is 1.33 times less risky than Pacer Swan. It trades about 0.41 of its potential returns per unit of risk. Pacer Swan SOS is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 2,903 in Pacer Swan SOS on September 2, 2024 and sell it today you would earn a total of 99.00 from holding Pacer Swan SOS or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Cboe vs. Pacer Swan SOS
Performance |
| Timeline |
| First Trust Cboe |
| Pacer Swan SOS |
First Trust and Pacer Swan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Pacer Swan
The main advantage of trading using opposite First Trust and Pacer Swan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Pacer Swan 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 Swan will offset losses from the drop in Pacer Swan's long position.| First Trust vs. FT Cboe Vest | First Trust vs. First Trust Exchange Traded | First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest |
| Pacer Swan vs. Pacer Swan SOS | Pacer Swan vs. Pacer Funds Trust | Pacer Swan vs. Pacer Swan SOS | Pacer Swan vs. Pacer Funds Trust |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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