Tuesday, July 5, 2011

Q2 Resutls for GSPY - Global diversification with less risk than emrging markets

Version 2 of this post.

The detail rational and objectives of the Globalized SPY  (GSPY) portfolio can be found at

The objective of this portfolio is to provide diversification from the S&P 500 (SPY)   via a portfolio that provides better returns with less volatility and risk than using the very popular emerging market ETFs such as VWO  (VWO) to provide portfolio diversification.

Basically, this portfolio is a mix of ETFs of the following countries:
For the first half of the year the portfolio's performance has not been great. Specifically;
  • GSPY has lost -.2% while VWO is up 1% for the year.
  • GSPY has been less volatile than VWO with a monthly SD of 2.6% vs. VWO's monthly SD of 3.6% and it seems to make common sense that these larger more established countries and companies shold be less risky than other emerging markets.
  • GSPY and VWO have shown a high correlation of 94%
  • GSPY underperformed the S&P 500s return of 5.5% YTD.  The positive spin on this negative comparative result is that GSPY is showing a -.20 correlation with the S&P500.   In reality this type of  negative correlation is the objective of  diversification.    Hopefully this negative correlation will continue if/when the S&P500 has a down period.
A half years results is not enough to draw any long term conclusions, but overall results are mixed at best.   However, the negative correlation with the S&P 500 provided by this blend of blue chip dominated companies still seems like it could provide a good balance the the S&P500, so CCI plans to continue to hold and monitor this portfolio.

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