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 Infrastructure and SPDR SP Global, 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

0.69

Correlation Coefficient

Global X  SPDR SP

Poor diversification

The 3 months correlation between Global and SPDR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Global X Infrastructure and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global 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 Infrastructure 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 Global 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

Given the investment horizon of 90 days Global X Infrastructure is expected to generate 2.44 times more return on investment than SPDR SP. However, Global X is 2.44 times more volatile than SPDR SP Global. It trades about 0.28 of its potential returns per unit of risk. SPDR SP Global is currently generating about 0.18 per unit of risk. If you would invest  4,125  in Global X Infrastructure on September 5, 2024 and sell it today you would earn a total of  433.00  from holding Global X Infrastructure or generate 10.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Global X Infrastructure  vs.  SPDR SP Global

Global X Infrastructure

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Infrastructure are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Global X exhibited solid returns over the last few months and may actually be approaching a breakup point.

SPDR SP Global

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Global are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, SPDR SP is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 Infrastructure and SPDR SP Global 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.