Correlation Between Pacer Trendpilot and SPDR SSGA

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

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

Diversification Opportunities for Pacer Trendpilot and SPDR SSGA

0.8

Correlation Coefficient

Pacer Trendpilot  SPDR SSGA

Very poor diversification

The 3 months correlation between Pacer and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Trendpilot Bond and SPDR SSGA Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Fixed and Pacer Trendpilot 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 Trendpilot Bond are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Fixed has no effect on the direction of Pacer Trendpilot i.e., Pacer Trendpilot and SPDR SSGA go up and down completely randomly.

Pair Corralation between Pacer Trendpilot and SPDR SSGA

Given the investment horizon of 90 days Pacer Trendpilot is expected to generate 1.2 times less return on investment than SPDR SSGA. But when comparing it to its historical volatility, Pacer Trendpilot Bond is 1.79 times less risky than SPDR SSGA. It trades about 0.13 of its potential returns per unit of risk. SPDR SSGA Fixed is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,556  in SPDR SSGA Fixed on September 18, 2024 and sell it today you would earn a total of  15.00  from holding SPDR SSGA Fixed or generate 0.59% return on investment over 90 days.

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

Pacer Trendpilot Bond  vs.  SPDR SSGA Fixed

Pacer Trendpilot Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR SSGA Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSGA Fixed has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SPDR SSGA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Pacer Trendpilot and SPDR SSGA

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

The idea behind Pacer Trendpilot Bond and SPDR SSGA Fixed 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.