Correlation Between NYSE Composite and Pacer Lunt
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Pacer Lunt 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 Lunt 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 Lunt Large, you can compare the effects of market volatilities on NYSE Composite and Pacer Lunt 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 Lunt. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Pacer Lunt.
Diversification Opportunities for NYSE Composite and Pacer Lunt
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Pacer is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Pacer Lunt Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Lunt Large 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 Lunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Lunt Large has no effect on the direction of NYSE Composite i.e., NYSE Composite and Pacer Lunt go up and down completely randomly.
Pair Corralation between NYSE Composite and Pacer Lunt
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.76 times more return on investment than Pacer Lunt. However, NYSE Composite is 1.31 times less risky than Pacer Lunt. It trades about 0.32 of its potential returns per unit of risk. Pacer Lunt Large is currently generating about 0.21 per unit of risk. If you would invest 1,909,542 in NYSE Composite on November 3, 2024 and sell it today you would earn a total of 90,340 from holding NYSE Composite or generate 4.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
NYSE Composite vs. Pacer Lunt Large
Performance |
| Timeline |
NYSE Composite and Pacer Lunt Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Pacer Lunt Large
Pair trading matchups for Pacer Lunt
Pair Trading with NYSE Composite and Pacer Lunt
The main advantage of trading using opposite NYSE Composite and Pacer Lunt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Pacer Lunt 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 Lunt will offset losses from the drop in Pacer Lunt's long position.| NYSE Composite vs. Arrow Electronics | NYSE Composite vs. Cirmaker Technology | NYSE Composite vs. Zhihu Inc ADR | NYSE Composite vs. Weibo Corp |
| Pacer Lunt vs. Pacer Lunt Large | Pacer Lunt vs. Pacer Lunt MidCap | Pacer Lunt vs. Pacer Trendpilot Bond | Pacer Lunt vs. Pacer Small Cap |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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