Correlation Between NYSE Composite and Pacer Large
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Pacer Large 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 NYSE Composite and Pacer Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Pacer Large Cap, you can compare the effects of market volatilities on NYSE Composite and Pacer Large 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 NYSE Composite with a short position of Pacer Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Pacer Large.
Diversification Opportunities for NYSE Composite and Pacer Large
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Pacer is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Pacer Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Large Cap and NYSE Composite 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 NYSE Composite are associated (or correlated) with Pacer Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Large Cap has no effect on the direction of NYSE Composite i.e., NYSE Composite and Pacer Large go up and down completely randomly.
Pair Corralation between NYSE Composite and Pacer Large
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.28 times less return on investment than Pacer Large. But when comparing it to its historical volatility, NYSE Composite is 1.89 times less risky than Pacer Large. It trades about 0.42 of its potential returns per unit of risk. Pacer Large Cap is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 2,969 in Pacer Large Cap on September 1, 2024 and sell it today you would earn a total of 392.00 from holding Pacer Large Cap or generate 13.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
NYSE Composite vs. Pacer Large Cap
Performance |
| Timeline |
NYSE Composite and Pacer Large Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Pacer Large Cap
Pair trading matchups for Pacer Large
Pair Trading with NYSE Composite and Pacer Large
The main advantage of trading using opposite NYSE Composite and Pacer Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Pacer Large 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 Large will offset losses from the drop in Pacer Large's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
| Pacer Large vs. Pacer Cash Cows | Pacer Large vs. Pacer Developed Markets | Pacer Large vs. Pacer Small Cap | Pacer Large vs. Pacer Global Cash |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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