Correlation Between SPDR SP and Global X

Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SP 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 SP 500 and Global X Psychedelic, you can compare the effects of market volatilities on SPDR SP 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 SP with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Global X.

Diversification Opportunities for SPDR SP and Global X

-0.6

Correlation Coefficient

SPDR SP  Global X

Excellent diversification

The 3 months correlation between SPDR and Global is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Global X Psychedelic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Psychedelic and SPDR SP 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 SP 500 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 Psychedelic has no effect on the direction of SPDR SP i.e., SPDR SP and Global X go up and down completely randomly.

Pair Corralation between SPDR SP and Global X

Considering the 90-day investment horizon SPDR SP is expected to generate 2.38 times less return on investment than Global X. But when comparing it to its historical volatility, SPDR SP 500 is 9.87 times less risky than Global X. It trades about 0.11 of its potential returns per unit of risk. Global X Psychedelic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  590.00  in Global X Psychedelic on October 11, 2024 and sell it today you would lose (20.00) from holding Global X Psychedelic or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	7.07%
Values	Daily Returns

SPDR SP 500  vs.  Global X Psychedelic

SPDR SP 500

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Global X Psychedelic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Psychedelic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Global X is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR SP and Global X

The main advantage of trading using opposite SPDR SP and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SP 500 and Global X Psychedelic 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.