Correlation Between Global X and SPDR SP

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

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

Diversification Opportunities for Global X and SPDR SP

0.63

Correlation Coefficient

Global X  SPDR SP

Poor diversification

The 3 months correlation between Global and SPDR is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Global X Lithium and SPDR SP Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Metals 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 Lithium 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 Metals has no effect on the direction of Global X i.e., Global X and SPDR SP go up and down completely randomly.

Pair Corralation between Global X and SPDR SP

Considering the 90-day investment horizon Global X Lithium is expected to generate 0.87 times more return on investment than SPDR SP. However, Global X Lithium is 1.16 times less risky than SPDR SP. It trades about -0.32 of its potential returns per unit of risk. SPDR SP Metals is currently generating about -0.42 per unit of risk. If you would invest  4,390  in Global X Lithium on October 11, 2024 and sell it today you would lose (327.00) from holding Global X Lithium or give up 7.45% of portfolio value over 90 days.

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

Global X Lithium  vs.  SPDR SP Metals

Global X Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

SPDR SP Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Global X and SPDR SP

The main advantage of trading using opposite Global X and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Lithium and SPDR SP Metals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.