Correlation Between Pacer Developed and Global X

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

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

Diversification Opportunities for Pacer Developed and Global X

0.72

Correlation Coefficient

Pacer Developed  Global X

Poor diversification

The 3 months correlation between Pacer and Global is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Developed Markets and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI and Pacer Developed 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 Pacer Developed Markets are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MSCI has no effect on the direction of Pacer Developed i.e., Pacer Developed and Global X go up and down completely randomly.

Pair Corralation between Pacer Developed and Global X

Given the investment horizon of 90 days Pacer Developed Markets is expected to under-perform the Global X. But the etf apears to be less risky and, when comparing its historical volatility, Pacer Developed Markets is 1.93 times less risky than Global X. The etf trades about -0.06 of its potential returns per unit of risk. The Global X MSCI is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,398  in Global X MSCI on September 16, 2024 and sell it today you would earn a total of  87.00  from holding Global X MSCI or generate 3.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Pacer Developed Markets  vs.  Global X MSCI

Pacer Developed Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer Developed Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Pacer Developed is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Global X MSCI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Global X is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pacer Developed and Global X

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

The idea behind Pacer Developed Markets and Global X MSCI 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.