Correlation Between Distillate Fundamental and Pacer Small

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

By analyzing existing cross correlation between Distillate Fundamental Stability and Pacer Small Cap, you can compare the effects of market volatilities on Distillate Fundamental and Pacer Small 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 Distillate Fundamental with a short position of Pacer Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Distillate Fundamental and Pacer Small.

Diversification Opportunities for Distillate Fundamental and Pacer Small

0.94

Correlation Coefficient

Distillate Fundamental  Pacer Small

Almost no diversification

The 3 months correlation between Distillate and Pacer is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Distillate Fundamental Stabili and Pacer Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Small Cap and Distillate Fundamental 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 Distillate Fundamental Stability are associated (or correlated) with Pacer Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Small Cap has no effect on the direction of Distillate Fundamental i.e., Distillate Fundamental and Pacer Small go up and down completely randomly.

Pair Corralation between Distillate Fundamental and Pacer Small

Given the investment horizon of 90 days Distillate Fundamental is expected to generate 1.89 times less return on investment than Pacer Small. But when comparing it to its historical volatility, Distillate Fundamental Stability is 1.22 times less risky than Pacer Small. It trades about 0.2 of its potential returns per unit of risk. Pacer Small Cap is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  3,368  in Pacer Small Cap on March 22, 2025 and sell it today you would earn a total of  579.00  from holding Pacer Small Cap or generate 17.19% return on investment over 90 days.

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

Distillate Fundamental Stabili  vs.  Pacer Small Cap

Distillate Fundamental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Distillate Fundamental Stability has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Distillate Fundamental is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pacer Small Cap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Small Cap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Pacer Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Distillate Fundamental and Pacer Small

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

The idea behind Distillate Fundamental Stability and Pacer Small Cap 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.