Correlation Between BetaShares Global and SPDR SP

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

By analyzing existing cross correlation between BetaShares Global Banks and SPDR SP 500, you can compare the effects of market volatilities on BetaShares Global and SPDR SP 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 BetaShares Global with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Global and SPDR SP.

Diversification Opportunities for BetaShares Global and SPDR SP

0.97

Correlation Coefficient

BetaShares Global  SPDR SP

Almost no diversification

The 3 months correlation between BetaShares and SPDR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Global Banks and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and BetaShares Global 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 BetaShares Global Banks are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of BetaShares Global i.e., BetaShares Global and SPDR SP go up and down completely randomly.

Pair Corralation between BetaShares Global and SPDR SP

Assuming the 90 days trading horizon BetaShares Global Banks is expected to generate 1.23 times more return on investment than SPDR SP. However, BetaShares Global is 1.23 times more volatile than SPDR SP 500. It trades about 0.22 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.27 per unit of risk. If you would invest  765.00  in BetaShares Global Banks on September 4, 2024 and sell it today you would earn a total of  103.00  from holding BetaShares Global Banks or generate 13.46% return on investment over 90 days.

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

BetaShares Global Banks  vs.  SPDR SP 500

BetaShares Global Banks

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Global Banks are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPDR SP 500

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaShares Global and SPDR SP

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

The idea behind BetaShares Global Banks and SPDR SP 500 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.