Correlation Between First Trust and Pacer Emerging
Can any of the company-specific risk be diversified away by investing in both First Trust and Pacer Emerging 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 Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Emerging and Pacer Emerging Markets, you can compare the effects of market volatilities on First Trust and Pacer Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Pacer Emerging.
Diversification Opportunities for First Trust and Pacer Emerging
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Pacer is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and Pacer Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Emerging Markets 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 Emerging are associated (or correlated) with Pacer Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Emerging Markets has no effect on the direction of First Trust i.e., First Trust and Pacer Emerging go up and down completely randomly.
Pair Corralation between First Trust and Pacer Emerging
Considering the 90-day investment horizon First Trust is expected to generate 1.15 times less return on investment than Pacer Emerging. But when comparing it to its historical volatility, First Trust Emerging is 1.02 times less risky than Pacer Emerging. It trades about 0.04 of its potential returns per unit of risk. Pacer Emerging Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,699 in Pacer Emerging Markets on September 3, 2024 and sell it today you would earn a total of 326.00 from holding Pacer Emerging Markets or generate 19.19% 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 Emerging vs. Pacer Emerging Markets
Performance |
| Timeline |
| First Trust Emerging |
| Pacer Emerging Markets |
First Trust and Pacer Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Pacer Emerging
The main advantage of trading using opposite First Trust and Pacer Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Pacer Emerging 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 Emerging will offset losses from the drop in Pacer Emerging's long position.| First Trust vs. First Trust Developed | First Trust vs. First Trust Emerging | First Trust vs. First Trust Europe | First Trust vs. First Trust Large |
| Pacer Emerging vs. Pacer Cash Cows | Pacer Emerging vs. Pacer Developed Markets | Pacer Emerging vs. First Trust Developed | Pacer Emerging vs. First Trust Dorsey |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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