Correlation Between Select STOXX and Pacer Solactive
Can any of the company-specific risk be diversified away by investing in both Select STOXX and Pacer Solactive 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 Select STOXX and Pacer Solactive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select STOXX Europe and Pacer Solactive Whitney, you can compare the effects of market volatilities on Select STOXX and Pacer Solactive 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 Select STOXX with a short position of Pacer Solactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select STOXX and Pacer Solactive.
Diversification Opportunities for Select STOXX and Pacer Solactive
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Select and Pacer is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Select STOXX Europe and Pacer Solactive Whitney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Solactive Whitney and Select STOXX 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 Select STOXX Europe are associated (or correlated) with Pacer Solactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Solactive Whitney has no effect on the direction of Select STOXX i.e., Select STOXX and Pacer Solactive go up and down completely randomly.
Pair Corralation between Select STOXX and Pacer Solactive
Given the investment horizon of 90 days Select STOXX Europe is expected to generate 1.12 times more return on investment than Pacer Solactive. However, Select STOXX is 1.12 times more volatile than Pacer Solactive Whitney. It trades about 0.44 of its potential returns per unit of risk. Pacer Solactive Whitney is currently generating about 0.24 per unit of risk. If you would invest 2,440 in Select STOXX Europe on November 3, 2024 and sell it today you would earn a total of 220.00 from holding Select STOXX Europe or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select STOXX Europe vs. Pacer Solactive Whitney
Performance |
| Timeline |
| Select STOXX Europe |
| Pacer Solactive Whitney |
Select STOXX and Pacer Solactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select STOXX and Pacer Solactive
The main advantage of trading using opposite Select STOXX and Pacer Solactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select STOXX position performs unexpectedly, Pacer Solactive 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 Solactive will offset losses from the drop in Pacer Solactive's long position.| Select STOXX vs. Ultimus Managers Trust | Select STOXX vs. American Beacon Select | Select STOXX vs. First Trust Indxx | Select STOXX vs. Direxion Daily SP |
| Pacer Solactive vs. Ultimus Managers Trust | Pacer Solactive vs. American Beacon Select | Pacer Solactive vs. First Trust Indxx | Pacer Solactive vs. Direxion Daily SP |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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