Correlation Between Innovator and Pacer Funds
Can any of the company-specific risk be diversified away by investing in both Innovator 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 Innovator and Pacer Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator SP 500 and Pacer Funds Trust, you can compare the effects of market volatilities on Innovator 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 Innovator with a short position of Pacer Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and Pacer Funds.
Diversification Opportunities for Innovator and Pacer Funds
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Innovator and Pacer is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 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 Innovator 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 Innovator SP 500 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 Innovator i.e., Innovator and Pacer Funds go up and down completely randomly.
Pair Corralation between Innovator and Pacer Funds
Given the investment horizon of 90 days Innovator is expected to generate 1.12 times less return on investment than Pacer Funds. But when comparing it to its historical volatility, Innovator SP 500 is 1.18 times less risky than Pacer Funds. It trades about 0.24 of its potential returns per unit of risk. Pacer Funds Trust is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,856 in Pacer Funds Trust on August 30, 2024 and sell it today you would earn a total of 51.00 from holding Pacer Funds Trust or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator SP 500 vs. Pacer Funds Trust
Performance |
| Timeline |
| Innovator SP 500 |
| Pacer Funds Trust |
Innovator and Pacer Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator and Pacer Funds
The main advantage of trading using opposite Innovator and Pacer Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator 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.| Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 |
| Pacer Funds vs. ABIVAX Socit Anonyme | Pacer Funds vs. Pinnacle Sherman Multi Strategy | Pacer Funds vs. Morningstar Unconstrained Allocation | Pacer Funds vs. SPACE |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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