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
Excellent diversification
The 3 months correlation between SPDR and Global is -0.66. 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 500 is expected to generate 0.94 times more return on investment than Global X. However, SPDR SP 500 is 1.07 times less risky than Global X. It trades about 0.15 of its potential returns per unit of risk. Global X MSCI is currently generating about 0.06 per unit of risk. If you would invest 44,886 in SPDR SP 500 on August 24, 2024 and sell it today you would earn a total of 14,481 from holding SPDR SP 500 or generate 32.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| 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. SPDR Nuveen Municipal | SPDR SP vs. SPDR SP 400 | SPDR SP vs. SPDR SP 400 | SPDR SP vs. SPDR SP 1500 |
| Global X vs. Dimensional Targeted Value | Global X vs. Dimensional Small Cap | Global X vs. Dimensional Marketwide Value | Global X vs. Dimensional Core Equity |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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