Correlation Between SPDR SP and Global X

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

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

Diversification Opportunities for SPDR SP and Global X

0.88

Correlation Coefficient

SPDR SP  Global X

Very poor diversification

The 3 months correlation between SPDR and Global is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Bank and Global X Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Blockchain and SPDR SP 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 SP Bank are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Blockchain has no effect on the direction of SPDR SP i.e., SPDR SP and Global X go up and down completely randomly.

Pair Corralation between SPDR SP and Global X

Considering the 90-day investment horizon SPDR SP Bank is expected to generate 0.29 times more return on investment than Global X. However, SPDR SP Bank is 3.4 times less risky than Global X. It trades about -0.24 of its potential returns per unit of risk. Global X Blockchain is currently generating about -0.09 per unit of risk. If you would invest  5,950  in SPDR SP Bank on October 8, 2024 and sell it today you would lose (385.00) from holding SPDR SP Bank or give up 6.47% of portfolio value over 90 days.

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

SPDR SP Bank  vs.  Global X Blockchain

SPDR SP Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Global X Blockchain

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Blockchain are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Global X demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and Global X

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

The idea behind SPDR SP Bank and Global X Blockchain 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.