Correlation Between SPDR Portfolio and Global X

Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio 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 Portfolio 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 Portfolio Aggregate and Global X MSCI, you can compare the effects of market volatilities on SPDR Portfolio 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 Portfolio with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Global X.

Diversification Opportunities for SPDR Portfolio and Global X

0.79

Correlation Coefficient

SPDR Portfolio  Global X

Poor diversification

The 3 months correlation between SPDR and Global is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio Aggregate and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI and SPDR Portfolio 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 Portfolio Aggregate 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 MSCI has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Global X go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Global X

Given the investment horizon of 90 days SPDR Portfolio is expected to generate 3.05 times less return on investment than Global X. But when comparing it to its historical volatility, SPDR Portfolio Aggregate is 2.91 times less risky than Global X. It trades about 0.17 of its potential returns per unit of risk. Global X MSCI is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,380  in Global X MSCI on December 21, 2024 and sell it today you would earn a total of  219.43  from holding Global X MSCI or generate 9.22% return on investment over 90 days.

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

SPDR Portfolio Aggregate  vs.  Global X MSCI

SPDR Portfolio Aggregate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio Aggregate are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Global X MSCI

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SPDR Portfolio and Global X

The main advantage of trading using opposite SPDR Portfolio and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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 Portfolio Aggregate and Global X MSCI 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.