Correlation Between Pacer Benchmark and First Trust
Can any of the company-specific risk be diversified away by investing in both Pacer Benchmark 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 Benchmark 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 Benchmark Data and First Trust NASDAQ, you can compare the effects of market volatilities on Pacer Benchmark 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 Benchmark with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Benchmark and First Trust.
Diversification Opportunities for Pacer Benchmark and First Trust
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pacer and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Benchmark Data and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ and Pacer Benchmark 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 Benchmark Data 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 NASDAQ has no effect on the direction of Pacer Benchmark i.e., Pacer Benchmark and First Trust go up and down completely randomly.
Pair Corralation between Pacer Benchmark and First Trust
Given the investment horizon of 90 days Pacer Benchmark is expected to generate 2.98 times less return on investment than First Trust. In addition to that, Pacer Benchmark is 1.24 times more volatile than First Trust NASDAQ. It trades about 0.02 of its total potential returns per unit of risk. First Trust NASDAQ is currently generating about 0.08 per unit of volatility. If you would invest 6,092 in First Trust NASDAQ on August 26, 2024 and sell it today you would earn a total of 2,423 from holding First Trust NASDAQ or generate 39.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacer Benchmark Data vs. First Trust NASDAQ
Performance |
| Timeline |
| Pacer Benchmark Data |
| First Trust NASDAQ |
Pacer Benchmark and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacer Benchmark and First Trust
The main advantage of trading using opposite Pacer Benchmark and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer Benchmark 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 Benchmark vs. Pacer Benchmark Industrial | Pacer Benchmark vs. First Trust NASDAQ | Pacer Benchmark vs. Global X Internet | Pacer Benchmark vs. ProShares Online Retail |
| First Trust vs. Global X Internet | First Trust vs. Pacer Benchmark Data | First Trust vs. SPDR SP Telecom | First Trust vs. Global X FinTech |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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