Correlation Between Pacer Swan and Tax-exempt Bond

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

By analyzing existing cross correlation between Pacer Swan SOS and Tax Exempt Bond Fund, you can compare the effects of market volatilities on Pacer Swan and Tax-exempt Bond 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 Swan with a short position of Tax-exempt Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Swan and Tax-exempt Bond.

Diversification Opportunities for Pacer Swan and Tax-exempt Bond

0.63

Correlation Coefficient

Pacer Swan  Tax-exempt Bond

Poor diversification

The 3 months correlation between Pacer and Tax-exempt is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Swan SOS and Tax Exempt Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Bond and Pacer Swan 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 Swan SOS are associated (or correlated) with Tax-exempt Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Bond has no effect on the direction of Pacer Swan i.e., Pacer Swan and Tax-exempt Bond go up and down completely randomly.

Pair Corralation between Pacer Swan and Tax-exempt Bond

Given the investment horizon of 90 days Pacer Swan SOS is expected to generate 2.24 times more return on investment than Tax-exempt Bond. However, Pacer Swan is 2.24 times more volatile than Tax Exempt Bond Fund. It trades about -0.1 of its potential returns per unit of risk. Tax Exempt Bond Fund is currently generating about -0.23 per unit of risk. If you would invest  3,013  in Pacer Swan SOS on January 18, 2024 and sell it today you would lose (26.00) from holding Pacer Swan SOS or give up 0.86% of portfolio value over 90 days.

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

Pacer Swan SOS  vs.  Tax Exempt Bond Fund

Pacer Swan SOS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Swan SOS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Pacer Swan is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Tax Exempt Bond

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Exempt Bond Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax-exempt Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pacer Swan and Tax-exempt Bond

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

The idea behind Pacer Swan SOS and Tax Exempt Bond Fund 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.