Correlation Between First Trust and Pacer Solactive
Can any of the company-specific risk be diversified away by investing in both First Trust and Pacer Solactive 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 Solactive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and Pacer Solactive Whitney, you can compare the effects of market volatilities on First Trust and Pacer Solactive 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 Solactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Pacer Solactive.
Diversification Opportunities for First Trust and Pacer Solactive
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Pacer is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and Pacer Solactive Whitney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Solactive Whitney 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 Indxx are associated (or correlated) with Pacer Solactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Solactive Whitney has no effect on the direction of First Trust i.e., First Trust and Pacer Solactive go up and down completely randomly.
Pair Corralation between First Trust and Pacer Solactive
Given the investment horizon of 90 days First Trust is expected to generate 1.28 times less return on investment than Pacer Solactive. In addition to that, First Trust is 1.49 times more volatile than Pacer Solactive Whitney. It trades about 0.13 of its total potential returns per unit of risk. Pacer Solactive Whitney is currently generating about 0.24 per unit of volatility. If you would invest 2,412 in Pacer Solactive Whitney on November 3, 2024 and sell it today you would earn a total of 103.00 from holding Pacer Solactive Whitney or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Indxx vs. Pacer Solactive Whitney
Performance |
| Timeline |
| First Trust Indxx |
| Pacer Solactive Whitney |
First Trust and Pacer Solactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Pacer Solactive
The main advantage of trading using opposite First Trust and Pacer Solactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Pacer Solactive 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 Solactive will offset losses from the drop in Pacer Solactive's long position.| First Trust vs. Gabelli ETFs Trust | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. Northern Lights |
| Pacer Solactive vs. Ultimus Managers Trust | Pacer Solactive vs. American Beacon Select | Pacer Solactive vs. First Trust Indxx | Pacer Solactive vs. Direxion Daily SP |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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