Correlation Between SPDR SP and Pacer Funds
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Pacer Funds 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 SP and Pacer Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and Pacer Funds Trust, you can compare the effects of market volatilities on SPDR SP and Pacer Funds 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 SP with a short position of Pacer Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Pacer Funds.
Diversification Opportunities for SPDR SP and Pacer Funds
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and Pacer is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Pacer Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Funds Trust and SPDR SP 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 SP 500 are associated (or correlated) with Pacer Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Funds Trust has no effect on the direction of SPDR SP i.e., SPDR SP and Pacer Funds go up and down completely randomly.
Pair Corralation between SPDR SP and Pacer Funds
Considering the 90-day investment horizon SPDR SP is expected to generate 3.15 times less return on investment than Pacer Funds. In addition to that, SPDR SP is 1.16 times more volatile than Pacer Funds Trust. It trades about 0.03 of its total potential returns per unit of risk. Pacer Funds Trust is currently generating about 0.11 per unit of volatility. If you would invest 3,840 in Pacer Funds Trust on March 19, 2025 and sell it today you would earn a total of 61.00 from holding Pacer Funds Trust or generate 1.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. Pacer Funds Trust
Performance |
| Timeline |
| SPDR SP 500 |
| Pacer Funds Trust |
SPDR SP and Pacer Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Pacer Funds
The main advantage of trading using opposite SPDR SP and Pacer Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Pacer Funds 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 Funds will offset losses from the drop in Pacer Funds' long position.| SPDR SP vs. FT Vest Equity | SPDR SP vs. Northern Lights | SPDR SP vs. Dimensional International High | SPDR SP vs. First Trust Exchange Traded |
| Pacer Funds vs. Vanguard Total Stock | Pacer Funds vs. SPDR SP 500 | Pacer Funds vs. iShares Core SP | Pacer Funds vs. Vanguard Dividend Appreciation |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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