Correlation Between Avantis Emerging and Pacer Small

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

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

Diversification Opportunities for Avantis Emerging and Pacer Small

-0.05

Correlation Coefficient

Avantis Emerging  Pacer Small

Good diversification

The 3 months correlation between Avantis and Pacer is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Emerging Markets and Pacer Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Small Cap and Avantis Emerging 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 Avantis Emerging Markets are associated (or correlated) with Pacer Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Small Cap has no effect on the direction of Avantis Emerging i.e., Avantis Emerging and Pacer Small go up and down completely randomly.

Pair Corralation between Avantis Emerging and Pacer Small

Given the investment horizon of 90 days Avantis Emerging Markets is expected to under-perform the Pacer Small. But the etf apears to be less risky and, when comparing its historical volatility, Avantis Emerging Markets is 1.46 times less risky than Pacer Small. The etf trades about -0.07 of its potential returns per unit of risk. The Pacer Small Cap is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,430  in Pacer Small Cap on October 1, 2024 and sell it today you would lose (28.00) from holding Pacer Small Cap or give up 0.63% of portfolio value over 90 days.

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

Avantis Emerging Markets  vs.  Pacer Small Cap

Avantis Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pacer Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Avantis Emerging and Pacer Small

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

The idea behind Avantis Emerging Markets and Pacer Small Cap 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.