Correlation Between MicroSectors FANG and Pacer Benchmark
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Pacer Benchmark 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 Benchmark 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 Benchmark Data, you can compare the effects of market volatilities on MicroSectors FANG and Pacer Benchmark 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 Benchmark. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Pacer Benchmark.
Diversification Opportunities for MicroSectors FANG and Pacer Benchmark
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MicroSectors and Pacer is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Pacer Benchmark Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Benchmark Data 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 Benchmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Benchmark Data has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Pacer Benchmark go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Pacer Benchmark
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 4.62 times more return on investment than Pacer Benchmark. However, MicroSectors FANG is 4.62 times more volatile than Pacer Benchmark Data. It trades about 0.22 of its potential returns per unit of risk. Pacer Benchmark Data is currently generating about 0.1 per unit of risk. If you would invest 52,572 in MicroSectors FANG Index on September 13, 2024 and sell it today you would earn a total of 9,328 from holding MicroSectors FANG Index or generate 17.74% 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 Benchmark Data
Performance |
| Timeline |
| MicroSectors FANG Index |
| Pacer Benchmark Data |
MicroSectors FANG and Pacer Benchmark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Pacer Benchmark
The main advantage of trading using opposite MicroSectors FANG and Pacer Benchmark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Pacer Benchmark 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 Benchmark will offset losses from the drop in Pacer Benchmark's long position.| MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. MicroSectors Solactive FANG | MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Technology |
| Pacer Benchmark vs. Pacer Benchmark Industrial | Pacer Benchmark vs. First Trust NASDAQ | Pacer Benchmark vs. Global X Internet | Pacer Benchmark vs. ProShares Online Retail |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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