Correlation Between SPDR SP and WisdomTree Global

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

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

Diversification Opportunities for SPDR SP and WisdomTree Global

0.89

Correlation Coefficient

SPDR SP  WisdomTree Global

Very poor diversification

The 3 months correlation between SPDR and WisdomTree is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Global and WisdomTree Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Global High 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 Global are associated (or correlated) with WisdomTree Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Global High has no effect on the direction of SPDR SP i.e., SPDR SP and WisdomTree Global go up and down completely randomly.

Pair Corralation between SPDR SP and WisdomTree Global

Given the investment horizon of 90 days SPDR SP is expected to generate 1.3 times less return on investment than WisdomTree Global. But when comparing it to its historical volatility, SPDR SP Global is 1.06 times less risky than WisdomTree Global. It trades about 0.15 of its potential returns per unit of risk. WisdomTree Global High is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5,187  in WisdomTree Global High on December 29, 2024 and sell it today you would earn a total of  393.00  from holding WisdomTree Global High or generate 7.58% return on investment over 90 days.

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

SPDR SP Global  vs.  WisdomTree Global High

SPDR SP Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, SPDR SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WisdomTree Global High

Risk-Adjusted Performance

Good

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

Pair Trading with SPDR SP and WisdomTree Global

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

The idea behind SPDR SP Global and WisdomTree Global High 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.