Correlation Between Pacer Funds and FT Cboe
Can any of the company-specific risk be diversified away by investing in both Pacer Funds and FT Cboe 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 Funds and FT Cboe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacer Funds Trust and FT Cboe Vest, you can compare the effects of market volatilities on Pacer Funds and FT Cboe 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 Funds with a short position of FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Funds and FT Cboe.
Diversification Opportunities for Pacer Funds and FT Cboe
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Pacer and BUFD is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Funds Trust and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest and Pacer Funds 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 Funds Trust are associated (or correlated) with FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Pacer Funds i.e., Pacer Funds and FT Cboe go up and down completely randomly.
Pair Corralation between Pacer Funds and FT Cboe
Given the investment horizon of 90 days Pacer Funds is expected to generate 1.08 times less return on investment than FT Cboe. But when comparing it to its historical volatility, Pacer Funds Trust is 1.73 times less risky than FT Cboe. It trades about 0.28 of its potential returns per unit of risk. FT Cboe Vest is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,520 in FT Cboe Vest on August 26, 2024 and sell it today you would earn a total of 32.00 from holding FT Cboe Vest or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacer Funds Trust vs. FT Cboe Vest
Performance |
| Timeline |
| Pacer Funds Trust |
| FT Cboe Vest |
Pacer Funds and FT Cboe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacer Funds and FT Cboe
The main advantage of trading using opposite Pacer Funds and FT Cboe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer Funds position performs unexpectedly, FT Cboe 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 FT Cboe will offset losses from the drop in FT Cboe's long position.The idea behind Pacer Funds Trust and FT Cboe Vest pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| FT Cboe vs. First Trust Cboe | FT Cboe vs. FT Cboe Vest | FT Cboe vs. FT Cboe Vest | FT Cboe vs. First Trust Exchange Traded |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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