Correlation Between Global X and SPDR Portfolio

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

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

Diversification Opportunities for Global X and SPDR Portfolio

0.93

Correlation Coefficient

Global X  SPDR Portfolio

Almost no diversification

The 3 months correlation between Global and SPDR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and SPDR Portfolio Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Emerging and Global X 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 Global X Funds are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Emerging has no effect on the direction of Global X i.e., Global X and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Global X and SPDR Portfolio

Considering the 90-day investment horizon Global X is expected to generate 4.05 times less return on investment than SPDR Portfolio. But when comparing it to its historical volatility, Global X Funds is 1.23 times less risky than SPDR Portfolio. It trades about 0.02 of its potential returns per unit of risk. SPDR Portfolio Emerging is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,801  in SPDR Portfolio Emerging on September 1, 2024 and sell it today you would earn a total of  139.00  from holding SPDR Portfolio Emerging or generate 3.66% return on investment over 90 days.

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

Global X Funds  vs.  SPDR Portfolio Emerging

Global X Funds

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Global X is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR Portfolio Emerging

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio Emerging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SPDR Portfolio is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and SPDR Portfolio

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

The idea behind Global X Funds and SPDR Portfolio Emerging 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.