Correlation Between MicroSectors FANG and Pacer American
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Pacer American 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 MicroSectors FANG and Pacer American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and Pacer American Energy, you can compare the effects of market volatilities on MicroSectors FANG and Pacer American 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 MicroSectors FANG with a short position of Pacer American. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Pacer American.
Diversification Opportunities for MicroSectors FANG and Pacer American
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between MicroSectors and Pacer is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Pacer American Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer American Energy and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with Pacer American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer American Energy has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Pacer American go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Pacer American
Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Pacer American. In addition to that, MicroSectors FANG is 4.76 times more volatile than Pacer American Energy. It trades about -0.11 of its total potential returns per unit of risk. Pacer American Energy is currently generating about 0.12 per unit of volatility. If you would invest 2,521 in Pacer American Energy on October 23, 2024 and sell it today you would earn a total of 1,806 from holding Pacer American Energy or generate 71.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Pacer American Energy
Performance |
| Timeline |
| MicroSectors FANG Index |
| Pacer American Energy |
MicroSectors FANG and Pacer American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Pacer American
The main advantage of trading using opposite MicroSectors FANG and Pacer American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Pacer American 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 American will offset losses from the drop in Pacer American's long position.| MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Technology | MicroSectors FANG vs. Direxion Daily SP |
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.
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