Correlation Between IndexIQ ETF and IndexIQ
Can any of the company-specific risk be diversified away by investing in both IndexIQ ETF and IndexIQ 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 IndexIQ 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 IndexIQ, you can compare the effects of market volatilities on IndexIQ ETF and IndexIQ 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 IndexIQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of IndexIQ ETF and IndexIQ.
Diversification Opportunities for IndexIQ ETF and IndexIQ
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IndexIQ and IndexIQ is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding IndexIQ ETF Trust and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ 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 IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of IndexIQ ETF i.e., IndexIQ ETF and IndexIQ go up and down completely randomly.
Pair Corralation between IndexIQ ETF and IndexIQ
If you would invest 2,627 in IndexIQ ETF Trust on September 3, 2024 and sell it today you would earn a total of 85.00 from holding IndexIQ ETF Trust or generate 3.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 1.72% |
| Values | Daily Returns |
IndexIQ ETF Trust vs. IndexIQ
Performance |
| Timeline |
| IndexIQ ETF Trust |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| IndexIQ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
IndexIQ ETF and IndexIQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IndexIQ ETF and IndexIQ
The main advantage of trading using opposite IndexIQ ETF and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IndexIQ ETF position performs unexpectedly, IndexIQ 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 IndexIQ will offset losses from the drop in IndexIQ's long position.The idea behind IndexIQ ETF Trust and IndexIQ 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.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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