Correlation Between Pacer Cash and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Pacer Cash 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 Cash 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 Cash Cows and SPDR SP 400, you can compare the effects of market volatilities on Pacer Cash 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 Cash with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Cash and SPDR SP.

Diversification Opportunities for Pacer Cash and SPDR SP

0.79

Correlation Coefficient

Pacer Cash  SPDR SP

Poor diversification

The 3 months correlation between Pacer and SPDR is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Cash Cows and SPDR SP 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 400 and Pacer Cash 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 Cash Cows 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 400 has no effect on the direction of Pacer Cash i.e., Pacer Cash and SPDR SP go up and down completely randomly.

Pair Corralation between Pacer Cash and SPDR SP

Given the investment horizon of 90 days Pacer Cash Cows is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, Pacer Cash Cows is 1.2 times less risky than SPDR SP. The etf trades about -0.25 of its potential returns per unit of risk. The SPDR SP 400 is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  7,500  in SPDR SP 400 on February 9, 2024 and sell it today you would lose (97.00) from holding SPDR SP 400 or give up 1.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Pacer Cash Cows  vs.  SPDR SP 400

Pacer Cash Cows

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Cash Cows are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Pacer Cash is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR SP 400

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 400 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Pacer Cash and SPDR SP

The main advantage of trading using opposite Pacer Cash and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer Cash 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.

The idea behind Pacer Cash Cows and SPDR SP 400 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.