Correlation Between Pacer Small and Avantis Small
Can any of the company-specific risk be diversified away by investing in both Pacer Small and Avantis Small 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 Pacer Small and Avantis Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacer Small Cap and Avantis Small Cap, you can compare the effects of market volatilities on Pacer Small and Avantis Small 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 Pacer Small with a short position of Avantis Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Small and Avantis Small.
Diversification Opportunities for Pacer Small and Avantis Small
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pacer and Avantis is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Small Cap and Avantis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Small Cap and Pacer Small 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 Pacer Small Cap are associated (or correlated) with Avantis Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Small Cap has no effect on the direction of Pacer Small i.e., Pacer Small and Avantis Small go up and down completely randomly.
Pair Corralation between Pacer Small and Avantis Small
Given the investment horizon of 90 days Pacer Small is expected to generate 1.32 times less return on investment than Avantis Small. But when comparing it to its historical volatility, Pacer Small Cap is 1.02 times less risky than Avantis Small. It trades about 0.05 of its potential returns per unit of risk. Avantis Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,305 in Avantis Small Cap on August 30, 2024 and sell it today you would earn a total of 3,223 from holding Avantis Small Cap or generate 44.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacer Small Cap vs. Avantis Small Cap
Performance |
| Timeline |
| Pacer Small Cap |
| Avantis Small Cap |
Pacer Small and Avantis Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacer Small and Avantis Small
The main advantage of trading using opposite Pacer Small and Avantis Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer Small position performs unexpectedly, Avantis Small 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 Avantis Small will offset losses from the drop in Avantis Small's long position.| Pacer Small vs. Pacer Cash Cows | Pacer Small vs. Pacer Global Cash | Pacer Small vs. Pacer Developed Markets | Pacer Small vs. Invesco SP SmallCap |
| Avantis Small vs. Dimensional ETF Trust | Avantis Small vs. Vanguard Small Cap Index | Avantis Small vs. First Trust Multi Manager | Avantis Small vs. Vanguard SP Small Cap |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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