Correlation Between Pacer Large and Sprott Nickel

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

By analyzing existing cross correlation between Pacer Large Cap and Sprott Nickel Miners, you can compare the effects of market volatilities on Pacer Large and Sprott Nickel 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 Large with a short position of Sprott Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Large and Sprott Nickel.

Diversification Opportunities for Pacer Large and Sprott Nickel

-0.17

Correlation Coefficient

Pacer Large  Sprott Nickel

Good diversification

The 3 months correlation between Pacer and Sprott is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Large Cap and Sprott Nickel Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Nickel Miners and Pacer Large 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 Large Cap are associated (or correlated) with Sprott Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Nickel Miners has no effect on the direction of Pacer Large i.e., Pacer Large and Sprott Nickel go up and down completely randomly.

Pair Corralation between Pacer Large and Sprott Nickel

Given the investment horizon of 90 days Pacer Large Cap is expected to generate 0.82 times more return on investment than Sprott Nickel. However, Pacer Large Cap is 1.22 times less risky than Sprott Nickel. It trades about -0.05 of its potential returns per unit of risk. Sprott Nickel Miners is currently generating about -0.2 per unit of risk. If you would invest  3,392  in Pacer Large Cap on December 3, 2024 and sell it today you would lose (146.00) from holding Pacer Large Cap or give up 4.3% of portfolio value over 90 days.

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

Pacer Large Cap  vs.  Sprott Nickel Miners

Pacer Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer Large Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pacer Large is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sprott Nickel Miners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sprott Nickel Miners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with Pacer Large and Sprott Nickel

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

The idea behind Pacer Large Cap and Sprott Nickel Miners 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.