Correlation Between Pacer Financial and Vanguard High

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

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

Diversification Opportunities for Pacer Financial and Vanguard High

0.72

Correlation Coefficient

Pacer Financial  Vanguard High

Poor diversification

The 3 months correlation between Pacer and Vanguard is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Financial and Vanguard High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Dividend and Pacer Financial 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 Financial are associated (or correlated) with Vanguard High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Dividend has no effect on the direction of Pacer Financial i.e., Pacer Financial and Vanguard High go up and down completely randomly.

Pair Corralation between Pacer Financial and Vanguard High

Given the investment horizon of 90 days Pacer Financial is expected to generate 1.8 times less return on investment than Vanguard High. But when comparing it to its historical volatility, Pacer Financial is 2.02 times less risky than Vanguard High. It trades about 0.12 of its potential returns per unit of risk. Vanguard High Dividend is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  12,620  in Vanguard High Dividend on September 17, 2024 and sell it today you would earn a total of  579.00  from holding Vanguard High Dividend or generate 4.59% return on investment over 90 days.

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

Pacer Financial  vs.  Vanguard High Dividend

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.

Vanguard High Dividend

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard High Dividend are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard High is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pacer Financial and Vanguard High

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

The idea behind Pacer Financial and Vanguard High Dividend 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.