Correlation Between Pacer Financial and SSgA SPDR

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

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

Diversification Opportunities for Pacer Financial and SSgA SPDR

0.62

Correlation Coefficient

Pacer Financial  SSgA SPDR

Poor diversification

The 3 months correlation between Pacer and SSgA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Financial and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs and Pacer Financial 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 Financial are associated (or correlated) with SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Pacer Financial i.e., Pacer Financial and SSgA SPDR go up and down completely randomly.

Pair Corralation between Pacer Financial and SSgA SPDR

Given the investment horizon of 90 days Pacer Financial is expected to generate 0.59 times more return on investment than SSgA SPDR. However, Pacer Financial is 1.7 times less risky than SSgA SPDR. It trades about 0.13 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.05 per unit of risk. If you would invest  3,026  in Pacer Financial on September 30, 2024 and sell it today you would earn a total of  977.00  from holding Pacer Financial or generate 32.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.79%
Values	Daily Returns

Pacer Financial  vs.  SSgA SPDR ETFs

Pacer Financial

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Pacer Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pacer Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SSgA SPDR ETFs

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR ETFs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SSgA SPDR is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pacer Financial and SSgA SPDR

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

The idea behind Pacer Financial and SSgA SPDR ETFs 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.