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 Digital, 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

0.88

Correlation Coefficient

SPDR MSCI  Pacer BlueStar

Very poor diversification

The 3 months correlation between SPDR and Pacer is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI USA and Pacer BlueStar Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer BlueStar Digital 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 Digital 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. In addition to that, SPDR MSCI is 1.2 times more volatile than Pacer BlueStar Digital. It trades about -0.03 of its total potential returns per unit of risk. Pacer BlueStar Digital is currently generating about 0.03 per unit of volatility. If you would invest  2,545  in Pacer BlueStar Digital on October 22, 2024 and sell it today you would earn a total of  9.00  from holding Pacer BlueStar Digital or generate 0.35% return on investment over 90 days.

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

SPDR MSCI USA  vs.  Pacer BlueStar Digital

SPDR MSCI USA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI USA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR MSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pacer BlueStar Digital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer BlueStar Digital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Pacer BlueStar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 Digital 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.