Correlation Between Pacer Lunt and SPDR MSCI

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

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

Diversification Opportunities for Pacer Lunt and SPDR MSCI

0.43

Correlation Coefficient

Pacer Lunt  SPDR MSCI

Very weak diversification

The 3 months correlation between Pacer and SPDR is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Lunt Large and SPDR MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI USA and Pacer Lunt 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 Lunt Large are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI USA has no effect on the direction of Pacer Lunt i.e., Pacer Lunt and SPDR MSCI go up and down completely randomly.

Pair Corralation between Pacer Lunt and SPDR MSCI

Given the investment horizon of 90 days Pacer Lunt is expected to generate 1.02 times less return on investment than SPDR MSCI. In addition to that, Pacer Lunt is 1.03 times more volatile than SPDR MSCI USA. It trades about 0.09 of its total potential returns per unit of risk. SPDR MSCI USA is currently generating about 0.1 per unit of volatility. If you would invest  2,194  in SPDR MSCI USA on October 24, 2024 and sell it today you would earn a total of  1,075  from holding SPDR MSCI USA or generate 49.0% return on investment over 90 days.

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

Pacer Lunt Large  vs.  SPDR MSCI USA

Pacer Lunt Large

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Lunt Large are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Pacer Lunt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR MSCI USA

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI USA are ranked lower than 7 (%) 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.

Pair Trading with Pacer Lunt and SPDR MSCI

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

The idea behind Pacer Lunt Large and SPDR MSCI USA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.