Correlation Between SPDR SP and Pacer Nasdaq
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Pacer Nasdaq 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 SPDR SP and Pacer Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP World and Pacer Nasdaq International, you can compare the effects of market volatilities on SPDR SP and Pacer Nasdaq 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 SPDR SP with a short position of Pacer Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Pacer Nasdaq.
Diversification Opportunities for SPDR SP and Pacer Nasdaq
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and Pacer is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP World and Pacer Nasdaq International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Nasdaq Interna and SPDR SP 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 SPDR SP World are associated (or correlated) with Pacer Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Nasdaq Interna has no effect on the direction of SPDR SP i.e., SPDR SP and Pacer Nasdaq go up and down completely randomly.
Pair Corralation between SPDR SP and Pacer Nasdaq
Given the investment horizon of 90 days SPDR SP World is expected to generate 0.81 times more return on investment than Pacer Nasdaq. However, SPDR SP World is 1.23 times less risky than Pacer Nasdaq. It trades about 0.03 of its potential returns per unit of risk. Pacer Nasdaq International is currently generating about -0.08 per unit of risk. If you would invest 3,568 in SPDR SP World on September 1, 2024 and sell it today you would earn a total of 14.00 from holding SPDR SP World or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR SP World vs. Pacer Nasdaq International
Performance |
| Timeline |
| SPDR SP World |
| Pacer Nasdaq Interna |
SPDR SP and Pacer Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Pacer Nasdaq
The main advantage of trading using opposite SPDR SP and Pacer Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Pacer Nasdaq 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 Nasdaq will offset losses from the drop in Pacer Nasdaq's long position.| SPDR SP vs. SPDR Portfolio Emerging | SPDR SP vs. SPDR Portfolio SP | SPDR SP vs. SPDR Portfolio SP | SPDR SP vs. SPDR Russell Small |
| Pacer Nasdaq vs. iShares ESG Aggregate | Pacer Nasdaq vs. SPDR MSCI Emerging | Pacer Nasdaq vs. Aquagold International | Pacer Nasdaq vs. Thrivent High Yield |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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