Correlation Between SPDR EURO and Pacer Trendpilot

Can any of the company-specific risk be diversified away by investing in both SPDR EURO and Pacer Trendpilot 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 EURO and Pacer Trendpilot into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR EURO STOXX and Pacer Trendpilot European, you can compare the effects of market volatilities on SPDR EURO and Pacer Trendpilot 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 EURO with a short position of Pacer Trendpilot. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR EURO and Pacer Trendpilot.

Diversification Opportunities for SPDR EURO and Pacer Trendpilot

0.98

Correlation Coefficient

SPDR EURO  Pacer Trendpilot

Almost no diversification

The 3 months correlation between SPDR and Pacer is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR EURO STOXX and Pacer Trendpilot European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Trendpilot European and SPDR EURO 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 EURO STOXX are associated (or correlated) with Pacer Trendpilot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Trendpilot European has no effect on the direction of SPDR EURO i.e., SPDR EURO and Pacer Trendpilot go up and down completely randomly.

Pair Corralation between SPDR EURO and Pacer Trendpilot

Considering the 90-day investment horizon SPDR EURO is expected to generate 1.36 times less return on investment than Pacer Trendpilot. In addition to that, SPDR EURO is 1.07 times more volatile than Pacer Trendpilot European. It trades about 0.18 of its total potential returns per unit of risk. Pacer Trendpilot European is currently generating about 0.26 per unit of volatility. If you would invest  2,616  in Pacer Trendpilot European on February 26, 2024 and sell it today you would earn a total of  107.00  from holding Pacer Trendpilot European or generate 4.09% return on investment over 90 days.

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

SPDR EURO STOXX  vs.  Pacer Trendpilot European

SPDR EURO STOXX

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR EURO STOXX are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, SPDR EURO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pacer Trendpilot European

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Trendpilot European are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Pacer Trendpilot is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR EURO and Pacer Trendpilot

The main advantage of trading using opposite SPDR EURO and Pacer Trendpilot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR EURO position performs unexpectedly, Pacer Trendpilot 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 Trendpilot will offset losses from the drop in Pacer Trendpilot's long position.

The idea behind SPDR EURO STOXX and Pacer Trendpilot European 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.