Correlation Between First Trust and Pacer Funds
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Pacer Funds 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 Funds Trust, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Pacer Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Pacer Funds.
Diversification Opportunities for First Trust and Pacer Funds
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Pacer is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Cboe 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 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 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 First Trust i.e., First Trust and Pacer Funds go up and down completely randomly.
Pair Corralation between First Trust and Pacer Funds
Given the investment horizon of 90 days First Trust Cboe is expected to generate 1.2 times more return on investment than Pacer Funds. However, First Trust is 1.2 times more volatile than Pacer Funds Trust. It trades about 0.15 of its potential returns per unit of risk. Pacer Funds Trust is currently generating about 0.14 per unit of risk. If you would invest 2,844 in First Trust Cboe on September 1, 2024 and sell it today you would earn a total of 224.00 from holding First Trust Cboe or generate 7.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
First Trust Cboe vs. Pacer Funds Trust
Performance |
| Timeline |
| First Trust Cboe |
| Pacer Funds Trust |
First Trust and Pacer Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Pacer Funds
The main advantage of trading using opposite First Trust and Pacer Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| 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 Funds vs. Innovator ETFs Trust | Pacer Funds vs. First Trust Cboe | Pacer Funds vs. Innovator SP 500 | Pacer Funds vs. Innovator Equity Power |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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