Correlation Between First Trust and IndexIQ Active
Can any of the company-specific risk be diversified away by investing in both First Trust and IndexIQ Active 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 First Trust and IndexIQ Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Enhanced and IndexIQ Active ETF, you can compare the effects of market volatilities on First Trust and IndexIQ Active 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 First Trust with a short position of IndexIQ Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IndexIQ Active.
Diversification Opportunities for First Trust and IndexIQ Active
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and IndexIQ is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and IndexIQ Active ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ Active ETF and First Trust 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 First Trust Enhanced are associated (or correlated) with IndexIQ Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ Active ETF has no effect on the direction of First Trust i.e., First Trust and IndexIQ Active go up and down completely randomly.
Pair Corralation between First Trust and IndexIQ Active
Given the investment horizon of 90 days First Trust is expected to generate 1.0 times less return on investment than IndexIQ Active. But when comparing it to its historical volatility, First Trust Enhanced is 9.68 times less risky than IndexIQ Active. It trades about 0.61 of its potential returns per unit of risk. IndexIQ Active ETF is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,908 in IndexIQ Active ETF on August 26, 2024 and sell it today you would earn a total of 195.00 from holding IndexIQ Active ETF or generate 10.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. IndexIQ Active ETF
Performance |
| Timeline |
| First Trust Enhanced |
| IndexIQ Active ETF |
First Trust and IndexIQ Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IndexIQ Active
The main advantage of trading using opposite First Trust and IndexIQ Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IndexIQ Active 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 Active will offset losses from the drop in IndexIQ Active's long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW | First Trust vs. First Trust Tactical |
| IndexIQ Active vs. First Trust Low | IndexIQ Active vs. First Trust Enhanced | IndexIQ Active vs. First Trust Tactical | IndexIQ Active vs. First Trust Managed |
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 Stocks Directory module to find actively traded stocks across global markets.
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