Correlation Between Vanguard Total and Pacer Financial

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Pacer Financial 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 Vanguard Total and Pacer Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Total Bond and Pacer Financial, you can compare the effects of market volatilities on Vanguard Total and Pacer Financial 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 Vanguard Total with a short position of Pacer Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Pacer Financial.

Diversification Opportunities for Vanguard Total and Pacer Financial

-0.66

Correlation Coefficient

Vanguard Total  Pacer Financial

Excellent diversification

The 3 months correlation between Vanguard and Pacer is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Pacer Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Financial and Vanguard Total 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 Vanguard Total Bond are associated (or correlated) with Pacer Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Financial has no effect on the direction of Vanguard Total i.e., Vanguard Total and Pacer Financial go up and down completely randomly.

Pair Corralation between Vanguard Total and Pacer Financial

Considering the 90-day investment horizon Vanguard Total Bond is expected to under-perform the Pacer Financial. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total Bond is 1.02 times less risky than Pacer Financial. The etf trades about -0.15 of its potential returns per unit of risk. The Pacer Financial is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,972  in Pacer Financial on September 17, 2024 and sell it today you would earn a total of  31.00  from holding Pacer Financial or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	30.77%
Values	Daily Returns

Vanguard Total Bond  vs.  Pacer Financial

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacer Financial

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Pacer Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pacer Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Total and Pacer Financial

The main advantage of trading using opposite Vanguard Total and Pacer Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Pacer Financial 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 Financial will offset losses from the drop in Pacer Financial's long position.

The idea behind Vanguard Total Bond and Pacer Financial 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.