Correlation Between Pacer Swan and First Trust
Can any of the company-specific risk be diversified away by investing in both Pacer Swan and First Trust 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 Swan and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacer Swan SOS and First Trust Cboe, you can compare the effects of market volatilities on Pacer Swan and First Trust 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 Swan with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Swan and First Trust.
Diversification Opportunities for Pacer Swan and First Trust
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Pacer and First is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Swan SOS and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and Pacer Swan 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 Swan SOS are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Cboe has no effect on the direction of Pacer Swan i.e., Pacer Swan and First Trust go up and down completely randomly.
Pair Corralation between Pacer Swan and First Trust
Given the investment horizon of 90 days Pacer Swan SOS is expected to generate 1.3 times more return on investment than First Trust. However, Pacer Swan is 1.3 times more volatile than First Trust Cboe. It trades about 0.15 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.19 per unit of risk. If you would invest 2,883 in Pacer Swan SOS on August 26, 2024 and sell it today you would earn a total of 48.00 from holding Pacer Swan SOS or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacer Swan SOS vs. First Trust Cboe
Performance |
| Timeline |
| Pacer Swan SOS |
| First Trust Cboe |
Pacer Swan and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacer Swan and First Trust
The main advantage of trading using opposite Pacer Swan and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer Swan position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Pacer Swan vs. First Trust Cboe | Pacer Swan vs. FT Cboe Vest | Pacer Swan vs. Innovator SP 500 | Pacer Swan vs. FT Cboe Vest |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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