Correlation Between Global X and SPDR Kensho

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

By analyzing existing cross correlation between Global X FinTech and SPDR Kensho New, you can compare the effects of market volatilities on Global X and SPDR Kensho 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 Kensho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and SPDR Kensho.

Diversification Opportunities for Global X and SPDR Kensho

0.98

Correlation Coefficient

Global X  SPDR Kensho

Almost no diversification

The 3 months correlation between Global and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Global X FinTech and SPDR Kensho New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho New 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 FinTech are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho New has no effect on the direction of Global X i.e., Global X and SPDR Kensho go up and down completely randomly.

Pair Corralation between Global X and SPDR Kensho

Given the investment horizon of 90 days Global X FinTech is expected to under-perform the SPDR Kensho. In addition to that, Global X is 1.11 times more volatile than SPDR Kensho New. It trades about -0.11 of its total potential returns per unit of risk. SPDR Kensho New is currently generating about -0.05 per unit of volatility. If you would invest  5,066  in SPDR Kensho New on December 19, 2024 and sell it today you would lose (250.00) from holding SPDR Kensho New or give up 4.93% of portfolio value over 90 days.

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

Global X FinTech  vs.  SPDR Kensho New

Global X FinTech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X FinTech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

SPDR Kensho New

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho New has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, SPDR Kensho 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 Global X and SPDR Kensho

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

The idea behind Global X FinTech and SPDR Kensho New 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.