Correlation Between Global X and TappAlpha SPY

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

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

Diversification Opportunities for Global X and TappAlpha SPY

0.91

Correlation Coefficient

Global X  TappAlpha SPY

Almost no diversification

The 3 months correlation between Global and TappAlpha is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Global X Russell and TappAlpha SPY Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TappAlpha SPY Growth 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 Russell are associated (or correlated) with TappAlpha SPY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TappAlpha SPY Growth has no effect on the direction of Global X i.e., Global X and TappAlpha SPY go up and down completely randomly.

Pair Corralation between Global X and TappAlpha SPY

Given the investment horizon of 90 days Global X Russell is expected to generate 0.86 times more return on investment than TappAlpha SPY. However, Global X Russell is 1.16 times less risky than TappAlpha SPY. It trades about -0.01 of its potential returns per unit of risk. TappAlpha SPY Growth is currently generating about -0.11 per unit of risk. If you would invest  1,658  in Global X Russell on October 9, 2024 and sell it today you would lose (4.00) from holding Global X Russell or give up 0.24% 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 Russell  vs.  TappAlpha SPY Growth

Global X Russell

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Russell are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

TappAlpha SPY Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TappAlpha SPY Growth are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, TappAlpha SPY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global X and TappAlpha SPY

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

The idea behind Global X Russell and TappAlpha SPY Growth 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.