Correlation Between Global X and Pacer American
Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and Pacer American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X MLP and Pacer American Energy, you can compare the effects of market volatilities on Global X 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 Global X with a short position of Pacer American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Pacer American.
Diversification Opportunities for Global X and Pacer American
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Pacer is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Global X MLP 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 Global X 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 Global X MLP 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 Global X i.e., Global X and Pacer American go up and down completely randomly.
Pair Corralation between Global X and Pacer American
Given the investment horizon of 90 days Global X MLP is expected to under-perform the Pacer American. But the etf apears to be less risky and, when comparing its historical volatility, Global X MLP is 1.35 times less risky than Pacer American. The etf trades about -0.2 of its potential returns per unit of risk. The Pacer American Energy is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 3,881 in Pacer American Energy on January 10, 2025 and sell it today you would lose (280.00) from holding Pacer American Energy or give up 7.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X MLP vs. Pacer American Energy
Performance |
| Timeline |
| Global X MLP |
| Pacer American Energy |
Global X and Pacer American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and Pacer American
The main advantage of trading using opposite Global X and Pacer American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.| Global X vs. Global X MLP | Global X vs. InfraCap MLP ETF | Global X vs. Alerian MLP ETF | Global X vs. First Trust North |
| Pacer American vs. First Trust North | Pacer American vs. Global X MLP | Pacer American vs. Global X MLP | Pacer American vs. Tortoise North American |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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