Correlation Between IndexIQ ETF and Utilities Select
Can any of the company-specific risk be diversified away by investing in both IndexIQ ETF and Utilities Select 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 IndexIQ ETF and Utilities Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IndexIQ ETF Trust and Utilities Select Sector, you can compare the effects of market volatilities on IndexIQ ETF and Utilities Select 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 IndexIQ ETF with a short position of Utilities Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of IndexIQ ETF and Utilities Select.
Diversification Opportunities for IndexIQ ETF and Utilities Select
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IndexIQ and Utilities is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding IndexIQ ETF Trust and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Select Sector and IndexIQ ETF 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 IndexIQ ETF Trust are associated (or correlated) with Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of IndexIQ ETF i.e., IndexIQ ETF and Utilities Select go up and down completely randomly.
Pair Corralation between IndexIQ ETF and Utilities Select
Given the investment horizon of 90 days IndexIQ ETF is expected to generate 18.24 times less return on investment than Utilities Select. But when comparing it to its historical volatility, IndexIQ ETF Trust is 1.17 times less risky than Utilities Select. It trades about 0.01 of its potential returns per unit of risk. Utilities Select Sector is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 7,991 in Utilities Select Sector on September 1, 2024 and sell it today you would earn a total of 302.00 from holding Utilities Select Sector or generate 3.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
IndexIQ ETF Trust vs. Utilities Select Sector
Performance |
| Timeline |
| IndexIQ ETF Trust |
| Utilities Select Sector |
IndexIQ ETF and Utilities Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IndexIQ ETF and Utilities Select
The main advantage of trading using opposite IndexIQ ETF and Utilities Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IndexIQ ETF position performs unexpectedly, Utilities Select 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 Utilities Select will offset losses from the drop in Utilities Select's long position.| IndexIQ ETF vs. IndexIQ ETF Trust | IndexIQ ETF vs. ProShares SP Kensho | IndexIQ ETF vs. Invesco Alerian Galaxy |
| Utilities Select vs. Consumer Staples Select | Utilities Select vs. Industrial Select Sector | Utilities Select vs. Materials Select Sector | Utilities Select vs. Health Care Select |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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