Correlation Between Pacer Large and Pacer Cash
Can any of the company-specific risk be diversified away by investing in both Pacer Large and Pacer Cash 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 Large and Pacer Cash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacer Large Cap and Pacer Cash Cows, you can compare the effects of market volatilities on Pacer Large and Pacer Cash 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 Large with a short position of Pacer Cash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Large and Pacer Cash.
Diversification Opportunities for Pacer Large and Pacer Cash
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pacer and Pacer is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Large Cap and Pacer Cash Cows in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Cash Cows and Pacer Large 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 Large Cap are associated (or correlated) with Pacer Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Cash Cows has no effect on the direction of Pacer Large i.e., Pacer Large and Pacer Cash go up and down completely randomly.
Pair Corralation between Pacer Large and Pacer Cash
Given the investment horizon of 90 days Pacer Large Cap is expected to generate 1.0 times more return on investment than Pacer Cash. However, Pacer Large Cap is 1.0 times less risky than Pacer Cash. It trades about 0.11 of its potential returns per unit of risk. Pacer Cash Cows is currently generating about 0.07 per unit of risk. If you would invest 1,926 in Pacer Large Cap on December 2, 2024 and sell it today you would earn a total of 1,379 from holding Pacer Large Cap or generate 71.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacer Large Cap vs. Pacer Cash Cows
Performance |
| Timeline |
| Pacer Large Cap |
| Pacer Cash Cows |
Pacer Large and Pacer Cash Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacer Large and Pacer Cash
The main advantage of trading using opposite Pacer Large and Pacer Cash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer Large position performs unexpectedly, Pacer Cash 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 Cash will offset losses from the drop in Pacer Cash's long position.| Pacer Large vs. Pacer Cash Cows | ||
| Pacer Large vs. Pacer Developed Markets | ||
| Pacer Large vs. Pacer Small Cap | ||
| Pacer Large vs. Pacer Global Cash |
| Pacer Cash vs. Pacer Small Cap | ||
| Pacer Cash vs. Pacer Developed Markets | ||
| Pacer Cash vs. Pacer Cash Cows | ||
| Pacer Cash vs. Pacer Global Cash |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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