Correlation Between Global X and IShares SPTSX

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

By analyzing existing cross correlation between Global X Intl and iShares SPTSX Capped, you can compare the effects of market volatilities on Global X and IShares SPTSX 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 IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares SPTSX.

Diversification Opportunities for Global X and IShares SPTSX

0.65

Correlation Coefficient

Global X  IShares SPTSX

Poor diversification

The 3 months correlation between Global and IShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Global X Intl and iShares SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Capped 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 Intl are associated (or correlated) with IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX Capped has no effect on the direction of Global X i.e., Global X and IShares SPTSX go up and down completely randomly.

Pair Corralation between Global X and IShares SPTSX

Assuming the 90 days trading horizon Global X Intl is expected to generate 0.67 times more return on investment than IShares SPTSX. However, Global X Intl is 1.5 times less risky than IShares SPTSX. It trades about -0.07 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about -0.13 per unit of risk. If you would invest  4,761  in Global X Intl on August 31, 2024 and sell it today you would lose (46.00) from holding Global X Intl or give up 0.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Global X Intl  vs.  iShares SPTSX Capped

Global X Intl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Intl has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares SPTSX Capped

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SPTSX Capped has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and IShares SPTSX

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

The idea behind Global X Intl and iShares SPTSX Capped 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.