Correlation Between Pacer Trendpilot and Vanguard

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

By analyzing existing cross correlation between Pacer Trendpilot 100 and Vanguard SP 500, you can compare the effects of market volatilities on Pacer Trendpilot and Vanguard 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 Trendpilot with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Trendpilot and Vanguard.

Diversification Opportunities for Pacer Trendpilot and Vanguard

0.93

Correlation Coefficient

Pacer Trendpilot  Vanguard

Almost no diversification

The 3 months correlation between Pacer and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Trendpilot 100 and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and Pacer Trendpilot 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 Trendpilot 100 are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Pacer Trendpilot i.e., Pacer Trendpilot and Vanguard go up and down completely randomly.

Pair Corralation between Pacer Trendpilot and Vanguard

Given the investment horizon of 90 days Pacer Trendpilot is expected to generate 1.88 times less return on investment than Vanguard. But when comparing it to its historical volatility, Pacer Trendpilot 100 is 1.31 times less risky than Vanguard. It trades about 0.1 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  45,505  in Vanguard SP 500 on February 20, 2024 and sell it today you would earn a total of  3,164  from holding Vanguard SP 500 or generate 6.95% return on investment over 90 days.

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

Pacer Trendpilot 100  vs.  Vanguard SP 500

Pacer Trendpilot 100

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Trendpilot 100 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pacer Trendpilot is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Vanguard SP 500

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Pacer Trendpilot and Vanguard

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

The idea behind Pacer Trendpilot 100 and Vanguard SP 500 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.