Correlation Between ProShares Trust and Pacer Financial

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

By analyzing existing cross correlation between ProShares Trust and Pacer Financial, you can compare the effects of market volatilities on ProShares Trust and Pacer Financial 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 ProShares Trust with a short position of Pacer Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and Pacer Financial.

Diversification Opportunities for ProShares Trust and Pacer Financial

-0.54

Correlation Coefficient

ProShares Trust  Pacer Financial

Excellent diversification

The 3 months correlation between ProShares and Pacer is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and Pacer Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Financial and ProShares Trust 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 ProShares Trust are associated (or correlated) with Pacer Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Financial has no effect on the direction of ProShares Trust i.e., ProShares Trust and Pacer Financial go up and down completely randomly.

Pair Corralation between ProShares Trust and Pacer Financial

Given the investment horizon of 90 days ProShares Trust is expected to under-perform the Pacer Financial. In addition to that, ProShares Trust is 1.14 times more volatile than Pacer Financial. It trades about -0.25 of its total potential returns per unit of risk. Pacer Financial is currently generating about 0.35 per unit of volatility. If you would invest  1,350  in Pacer Financial on September 18, 2024 and sell it today you would earn a total of  281.00  from holding Pacer Financial or generate 20.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	30.16%
Values	Daily Returns

ProShares Trust   vs.  Pacer Financial

ProShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Pacer Financial

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Pacer Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, Pacer Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Trust and Pacer Financial

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

The idea behind ProShares Trust and Pacer Financial 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.