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 MSCI, 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
Poor diversification
The 3 months correlation between SPDR and Global is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 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 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 MSCI 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 2.25 times less return on investment than Global X. But when comparing it to its historical volatility, SPDR SP 500 is 1.79 times less risky than Global X. It trades about 0.38 of its potential returns per unit of risk. Global X MSCI is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 7,291 in Global X MSCI on September 1, 2024 and sell it today you would earn a total of 1,061 from holding Global X MSCI or generate 14.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR SP 500 vs. Global X MSCI
Performance |
| Timeline |
| SPDR SP 500 |
| Global X MSCI |
SPDR SP and Global X Volatility Contrast
Predicted Return Density |
| Returns |
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.| SPDR SP vs. Vanguard Total Stock | SPDR SP vs. Vanguard FTSE Emerging | SPDR SP vs. FT Vest Equity | SPDR SP vs. Zillow Group Class |
| Global X vs. Global X MSCI | Global X vs. iShares MSCI Peru | Global X vs. iShares MSCI Chile | Global X vs. Global X MSCI |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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