Correlation Between Global X and SPDR SP

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Can any of the company-specific risk be diversified away by investing in both Global X and SPDR SP 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 SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Video and SPDR SP Telecom, you can compare the effects of market volatilities on Global X and SPDR SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and SPDR SP.

Diversification Opportunities for Global X and SPDR SP

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Global and SPDR is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Global X Video and SPDR SP Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Telecom 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 Video are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Telecom has no effect on the direction of Global X i.e., Global X and SPDR SP go up and down completely randomly.

Pair Corralation between Global X and SPDR SP

Given the investment horizon of 90 days Global X is expected to generate 2.14 times less return on investment than SPDR SP. In addition to that, Global X is 1.13 times more volatile than SPDR SP Telecom. It trades about 0.13 of its total potential returns per unit of risk. SPDR SP Telecom is currently generating about 0.32 per unit of volatility. If you would invest  10,123  in SPDR SP Telecom on September 1, 2024 and sell it today you would earn a total of  897.00  from holding SPDR SP Telecom or generate 8.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Global X Video  vs.  SPDR SP Telecom

 Performance 
       Timeline  
Global X Video 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Global X Video are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in December 2024.
SPDR SP Telecom 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Telecom are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, SPDR SP disclosed solid returns over the last few months and may actually be approaching a breakup point.

Global X and SPDR SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global X and SPDR SP

The main advantage of trading using opposite Global X and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.
The idea behind Global X Video and SPDR SP Telecom 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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