Correlation Between MicroSectors FANG and Pacer Funds

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

By analyzing existing cross correlation between MicroSectors FANG ETN and Pacer Funds Trust, you can compare the effects of market volatilities on MicroSectors FANG and Pacer Funds 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 Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Pacer Funds.

Diversification Opportunities for MicroSectors FANG and Pacer Funds

-0.57

Correlation Coefficient

MicroSectors FANG  Pacer Funds

Excellent diversification

The 3 months correlation between MicroSectors and Pacer is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG ETN and Pacer Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Funds Trust 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 ETN are associated (or correlated) with Pacer Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Funds Trust has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Pacer Funds go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Pacer Funds

Given the investment horizon of 90 days MicroSectors FANG ETN is expected to generate 1.75 times more return on investment than Pacer Funds. However, MicroSectors FANG is 1.75 times more volatile than Pacer Funds Trust. It trades about 0.17 of its potential returns per unit of risk. Pacer Funds Trust is currently generating about -0.01 per unit of risk. If you would invest  4,617  in MicroSectors FANG ETN on September 1, 2024 and sell it today you would earn a total of  761.00  from holding MicroSectors FANG ETN or generate 16.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

MicroSectors FANG ETN  vs.  Pacer Funds Trust

MicroSectors FANG ETN

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG ETN are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, MicroSectors FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pacer Funds Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer Funds Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Pacer Funds is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MicroSectors FANG and Pacer Funds

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

The idea behind MicroSectors FANG ETN and Pacer Funds Trust 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.