Correlation Between EA Series and Pacer Large
Can any of the company-specific risk be diversified away by investing in both EA Series and Pacer Large 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 EA Series and Pacer Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EA Series Trust and Pacer Large Cap, you can compare the effects of market volatilities on EA Series and Pacer Large 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 EA Series with a short position of Pacer Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of EA Series and Pacer Large.
Diversification Opportunities for EA Series and Pacer Large
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between STXG and Pacer is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and Pacer Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Large Cap and EA Series 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 EA Series Trust are associated (or correlated) with Pacer Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Large Cap has no effect on the direction of EA Series i.e., EA Series and Pacer Large go up and down completely randomly.
Pair Corralation between EA Series and Pacer Large
Given the investment horizon of 90 days EA Series is expected to generate 2.91 times less return on investment than Pacer Large. But when comparing it to its historical volatility, EA Series Trust is 1.19 times less risky than Pacer Large. It trades about 0.18 of its potential returns per unit of risk. Pacer Large Cap is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 3,006 in Pacer Large Cap on August 31, 2024 and sell it today you would earn a total of 355.00 from holding Pacer Large Cap or generate 11.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
EA Series Trust vs. Pacer Large Cap
Performance |
| Timeline |
| EA Series Trust |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Pacer Large Cap |
EA Series and Pacer Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EA Series and Pacer Large
The main advantage of trading using opposite EA Series and Pacer Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series position performs unexpectedly, Pacer Large 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 Large will offset losses from the drop in Pacer Large's long position.The idea behind EA Series Trust and Pacer Large Cap 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.| Pacer Large vs. Pacer Cash Cows | Pacer Large vs. Pacer Developed Markets | Pacer Large vs. Pacer Small Cap | Pacer Large vs. Pacer Global Cash |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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