Correlation Between Global X and SPDR ICE

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

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

Diversification Opportunities for Global X and SPDR ICE

0.74

Correlation Coefficient

Global X  SPDR ICE

Poor diversification

The 3 months correlation between Global and SPDR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Global X SuperIncome and SPDR ICE Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR ICE Preferred 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 SuperIncome are associated (or correlated) with SPDR ICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR ICE Preferred has no effect on the direction of Global X i.e., Global X and SPDR ICE go up and down completely randomly.

Pair Corralation between Global X and SPDR ICE

Given the investment horizon of 90 days Global X SuperIncome is expected to under-perform the SPDR ICE. But the etf apears to be less risky and, when comparing its historical volatility, Global X SuperIncome is 1.01 times less risky than SPDR ICE. The etf trades about -0.03 of its potential returns per unit of risk. The SPDR ICE Preferred is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,262  in SPDR ICE Preferred on December 28, 2024 and sell it today you would earn a total of  7.00  from holding SPDR ICE Preferred or generate 0.21% return on investment over 90 days.

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

Global X SuperIncome  vs.  SPDR ICE Preferred

Global X SuperIncome

Risk-Adjusted Performance

Weak

Over the last 90 days Global X SuperIncome has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR ICE Preferred

Risk-Adjusted Performance

Weak

Over the last 90 days SPDR ICE Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR ICE is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Global X and SPDR ICE

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

The idea behind Global X SuperIncome and SPDR ICE Preferred 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.