Correlation Between GM and IndexIQ ETF
Can any of the company-specific risk be diversified away by investing in both GM and IndexIQ ETF 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 GM and IndexIQ ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and IndexIQ ETF Trust, you can compare the effects of market volatilities on GM and IndexIQ ETF 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 GM with a short position of IndexIQ ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and IndexIQ ETF.
Diversification Opportunities for GM and IndexIQ ETF
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and IndexIQ is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and IndexIQ ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ ETF Trust and GM 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 General Motors are associated (or correlated) with IndexIQ ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ ETF Trust has no effect on the direction of GM i.e., GM and IndexIQ ETF go up and down completely randomly.
Pair Corralation between GM and IndexIQ ETF
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.98 times more return on investment than IndexIQ ETF. However, GM is 1.98 times more volatile than IndexIQ ETF Trust. It trades about 0.08 of its potential returns per unit of risk. IndexIQ ETF Trust is currently generating about -0.01 per unit of risk. If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
General Motors vs. IndexIQ ETF Trust
Performance |
| Timeline |
| General Motors |
| IndexIQ ETF Trust |
GM and IndexIQ ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and IndexIQ ETF
The main advantage of trading using opposite GM and IndexIQ ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, IndexIQ ETF 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 ETF will offset losses from the drop in IndexIQ ETF's long position.The idea behind General Motors and IndexIQ ETF Trust 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.| IndexIQ ETF vs. IndexIQ ETF Trust | IndexIQ ETF vs. ProShares SP Kensho | IndexIQ ETF vs. Invesco Alerian Galaxy |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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