Correlation Between Pacer Funds and First Trust
Can any of the company-specific risk be diversified away by investing in both Pacer Funds 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 Funds 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 Funds Trust and First Trust Mid, you can compare the effects of market volatilities on Pacer Funds 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 Funds with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Funds and First Trust.
Diversification Opportunities for Pacer Funds and First Trust
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pacer and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Funds Trust and First Trust Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Mid and Pacer Funds 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 Funds Trust 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 Mid has no effect on the direction of Pacer Funds i.e., Pacer Funds and First Trust go up and down completely randomly.
Pair Corralation between Pacer Funds and First Trust
Given the investment horizon of 90 days Pacer Funds Trust is expected to generate 2.89 times more return on investment than First Trust. However, Pacer Funds is 2.89 times more volatile than First Trust Mid. It trades about 0.13 of its potential returns per unit of risk. First Trust Mid is currently generating about -0.11 per unit of risk. If you would invest 4,716 in Pacer Funds Trust on September 26, 2024 and sell it today you would earn a total of 558.00 from holding Pacer Funds Trust or generate 11.83% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 14.29% |
Values | Daily Returns |
Pacer Funds Trust vs. First Trust Mid
Performance |
Timeline |
Pacer Funds Trust |
First Trust Mid |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Pacer Funds and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pacer Funds and First Trust
The main advantage of trading using opposite Pacer Funds and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer Funds 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 Funds vs. Technology Select Sector | Pacer Funds vs. Financial Select Sector | Pacer Funds vs. Consumer Discretionary Select | Pacer Funds vs. Industrial Select Sector |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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