Correlation Between FT Cboe and Pacer Funds

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

By analyzing existing cross correlation between FT Cboe Vest and Pacer Funds Trust, you can compare the effects of market volatilities on FT Cboe and Pacer Funds 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 FT Cboe with a short position of Pacer Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and Pacer Funds.

Diversification Opportunities for FT Cboe and Pacer Funds

0.89

Correlation Coefficient

FT Cboe  Pacer Funds

Very poor diversification

The 3 months correlation between BUFD and Pacer is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and Pacer Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Funds Trust and FT Cboe 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 FT Cboe Vest are associated (or correlated) with Pacer Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Funds Trust has no effect on the direction of FT Cboe i.e., FT Cboe and Pacer Funds go up and down completely randomly.

Pair Corralation between FT Cboe and Pacer Funds

Given the investment horizon of 90 days FT Cboe is expected to generate 1.0 times less return on investment than Pacer Funds. But when comparing it to its historical volatility, FT Cboe Vest is 1.17 times less risky than Pacer Funds. It trades about 0.16 of its potential returns per unit of risk. Pacer Funds Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,805  in Pacer Funds Trust on August 30, 2024 and sell it today you would earn a total of  89.00  from holding Pacer Funds Trust or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

FT Cboe Vest  vs.  Pacer Funds Trust

FT Cboe Vest

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, FT Cboe is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacer Funds Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Funds Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Pacer Funds is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FT Cboe and Pacer Funds

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

The idea behind FT Cboe Vest and Pacer Funds Trust 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.