Correlation Between Pacer Solactive and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Pacer Solactive and SPDR SP 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 Solactive and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacer Solactive Whitney and SPDR SP Transportation, you can compare the effects of market volatilities on Pacer Solactive and SPDR SP 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 Solactive with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Solactive and SPDR SP.
Diversification Opportunities for Pacer Solactive and SPDR SP
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pacer and SPDR is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Solactive Whitney and SPDR SP Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Transportation and Pacer Solactive 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 Solactive Whitney are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Transportation has no effect on the direction of Pacer Solactive i.e., Pacer Solactive and SPDR SP go up and down completely randomly.
Pair Corralation between Pacer Solactive and SPDR SP
Given the investment horizon of 90 days Pacer Solactive is expected to generate 4.65 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Pacer Solactive Whitney is 1.5 times less risky than SPDR SP. It trades about 0.12 of its potential returns per unit of risk. SPDR SP Transportation is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 8,637 in SPDR SP Transportation on October 24, 2024 and sell it today you would earn a total of 544.00 from holding SPDR SP Transportation or generate 6.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacer Solactive Whitney vs. SPDR SP Transportation
Performance |
| Timeline |
| Pacer Solactive Whitney |
| SPDR SP Transportation |
Pacer Solactive and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacer Solactive and SPDR SP
The main advantage of trading using opposite Pacer Solactive and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer Solactive position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| Pacer Solactive vs. First Trust Indxx | Pacer Solactive vs. Direxion Daily Industrials | Pacer Solactive vs. Themes Transatlantic Defense | Pacer Solactive vs. FlexShares STOXX Global |
| SPDR SP vs. First Trust Indxx | SPDR SP vs. Direxion Daily Industrials | SPDR SP vs. Themes Transatlantic Defense | SPDR SP vs. FlexShares STOXX Global |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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