Correlation Between SPDR Global and Affinity World

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

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

Diversification Opportunities for SPDR Global and Affinity World

0.26

Correlation Coefficient

SPDR Global  Affinity World

Modest diversification

The 3 months correlation between SPDR and Affinity is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Global Dow and Affinity World Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity World Leaders and SPDR 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 SPDR Global Dow are associated (or correlated) with Affinity World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity World Leaders has no effect on the direction of SPDR Global i.e., SPDR Global and Affinity World go up and down completely randomly.

Pair Corralation between SPDR Global and Affinity World

Considering the 90-day investment horizon SPDR Global Dow is expected to generate 0.84 times more return on investment than Affinity World. However, SPDR Global Dow is 1.19 times less risky than Affinity World. It trades about 0.12 of its potential returns per unit of risk. Affinity World Leaders is currently generating about -0.03 per unit of risk. If you would invest  13,188  in SPDR Global Dow on December 29, 2024 and sell it today you would earn a total of  777.00  from holding SPDR Global Dow or generate 5.89% return on investment over 90 days.

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

SPDR Global Dow  vs.  Affinity World Leaders

SPDR Global Dow

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Global Dow are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, SPDR Global is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Affinity World Leaders

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SPDR Global and Affinity World

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

The idea behind SPDR Global Dow and Affinity World Leaders 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.