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 Semiconductor, 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

0.45

Correlation Coefficient

Global X  SPDR SP

Very weak diversification

The 3 months correlation between Global and SPDR is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Global X Lithium and SPDR SP Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Semiconductor 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 Semiconductor 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 0.52 times more return on investment than SPDR SP. However, Global X Lithium is 1.94 times less risky than SPDR SP. It trades about -0.05 of its potential returns per unit of risk. SPDR SP Semiconductor is currently generating about -0.11 per unit of risk. If you would invest  4,222  in Global X Lithium on December 26, 2024 and sell it today you would lose (191.00) from holding Global X Lithium or give up 4.52% of portfolio value over 90 days.

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

Global X Lithium  vs.  SPDR SP Semiconductor

Global X Lithium

Risk-Adjusted Performance

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 comparatively stable forward indicators, Global X is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR SP Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing 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 Semiconductor 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.