Correlation Between SPDR MSCI and Pacer BlueStar

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

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

Diversification Opportunities for SPDR MSCI and Pacer BlueStar

0.61

Correlation Coefficient

SPDR MSCI  Pacer BlueStar

Poor diversification

The 3 months correlation between SPDR and Pacer is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI USA and Pacer BlueStar Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer BlueStar Engin and SPDR MSCI 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 MSCI USA are associated (or correlated) with Pacer BlueStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer BlueStar Engin has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and Pacer BlueStar go up and down completely randomly.

Pair Corralation between SPDR MSCI and Pacer BlueStar

Given the investment horizon of 90 days SPDR MSCI USA is expected to under-perform the Pacer BlueStar. But the etf apears to be less risky and, when comparing its historical volatility, SPDR MSCI USA is 1.35 times less risky than Pacer BlueStar. The etf trades about -0.11 of its potential returns per unit of risk. The Pacer BlueStar Engineering is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,174  in Pacer BlueStar Engineering on December 19, 2024 and sell it today you would earn a total of  6.00  from holding Pacer BlueStar Engineering or generate 0.28% return on investment over 90 days.

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

SPDR MSCI USA  vs.  Pacer BlueStar Engineering

SPDR MSCI USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR MSCI USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pacer BlueStar Engin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer BlueStar Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Pacer BlueStar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR MSCI and Pacer BlueStar

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

The idea behind SPDR MSCI USA and Pacer BlueStar Engineering 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.