Correlation Between First Trust and Pacer Benchmark
Can any of the company-specific risk be diversified away by investing in both First Trust and Pacer Benchmark 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 Benchmark into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Cloud and Pacer Benchmark Data, you can compare the effects of market volatilities on First Trust and Pacer Benchmark 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 Benchmark. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Pacer Benchmark.
Diversification Opportunities for First Trust and Pacer Benchmark
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and Pacer is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Cloud and Pacer Benchmark Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Benchmark Data 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 Cloud are associated (or correlated) with Pacer Benchmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Benchmark Data has no effect on the direction of First Trust i.e., First Trust and Pacer Benchmark go up and down completely randomly.
Pair Corralation between First Trust and Pacer Benchmark
Given the investment horizon of 90 days First Trust Cloud is expected to generate 1.45 times more return on investment than Pacer Benchmark. However, First Trust is 1.45 times more volatile than Pacer Benchmark Data. It trades about 0.19 of its potential returns per unit of risk. Pacer Benchmark Data is currently generating about 0.14 per unit of risk. If you would invest 8,946 in First Trust Cloud on September 1, 2024 and sell it today you would earn a total of 3,252 from holding First Trust Cloud or generate 36.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Cloud vs. Pacer Benchmark Data
Performance |
| Timeline |
| First Trust Cloud |
| Pacer Benchmark Data |
First Trust and Pacer Benchmark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Pacer Benchmark
The main advantage of trading using opposite First Trust and Pacer Benchmark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Pacer Benchmark 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 Benchmark will offset losses from the drop in Pacer Benchmark's long position.| First Trust vs. Nexalin Technology | First Trust vs. Kilroy Realty Corp | First Trust vs. Highwoods Properties | First Trust vs. Karat Packaging |
| Pacer Benchmark vs. Aquagold International | Pacer Benchmark vs. Thrivent High Yield | Pacer Benchmark vs. Morningstar Unconstrained Allocation | Pacer Benchmark vs. High Yield Municipal Fund |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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