Correlation Between Pacer Funds and Principal Spectrum

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

By analyzing existing cross correlation between Pacer Funds Trust and Principal Spectrum Preferred, you can compare the effects of market volatilities on Pacer Funds and Principal Spectrum 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 Funds with a short position of Principal Spectrum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Funds and Principal Spectrum.

Diversification Opportunities for Pacer Funds and Principal Spectrum

0.94

Correlation Coefficient

Pacer Funds  Principal Spectrum

Almost no diversification

The 3 months correlation between Pacer and Principal is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Funds Trust and Principal Spectrum Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Spectrum and Pacer Funds 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 Funds Trust are associated (or correlated) with Principal Spectrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Spectrum has no effect on the direction of Pacer Funds i.e., Pacer Funds and Principal Spectrum go up and down completely randomly.

Pair Corralation between Pacer Funds and Principal Spectrum

Given the investment horizon of 90 days Pacer Funds Trust is expected to generate 2.33 times more return on investment than Principal Spectrum. However, Pacer Funds is 2.33 times more volatile than Principal Spectrum Preferred. It trades about 0.19 of its potential returns per unit of risk. Principal Spectrum Preferred is currently generating about 0.26 per unit of risk. If you would invest  3,053  in Pacer Funds Trust on July 8, 2025 and sell it today you would earn a total of  120.00  from holding Pacer Funds Trust or generate 3.93% return on investment over 90 days.

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

Pacer Funds Trust  vs.  Principal Spectrum Preferred

Pacer Funds Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Funds Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Pacer Funds is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Principal Spectrum

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Spectrum Preferred are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Principal Spectrum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pacer Funds and Principal Spectrum

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

The idea behind Pacer Funds Trust and Principal Spectrum Preferred 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.