Correlation Between First Trust and IndexIQ ETF
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and IndexIQ ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ and IndexIQ ETF Trust, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of IndexIQ ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IndexIQ ETF.
Diversification Opportunities for First Trust and IndexIQ ETF
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and IndexIQ is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ 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 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 NASDAQ 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 First Trust i.e., First Trust and IndexIQ ETF go up and down completely randomly.
Pair Corralation between First Trust and IndexIQ ETF
Given the investment horizon of 90 days First Trust NASDAQ is expected to under-perform the IndexIQ ETF. In addition to that, First Trust is 2.17 times more volatile than IndexIQ ETF Trust. It trades about -0.03 of its total potential returns per unit of risk. IndexIQ ETF Trust is currently generating about 0.02 per unit of volatility. If you would invest 1,932 in IndexIQ ETF Trust on August 26, 2024 and sell it today you would earn a total of 192.00 from holding IndexIQ ETF Trust or generate 9.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust NASDAQ vs. IndexIQ ETF Trust
Performance |
| Timeline |
| First Trust NASDAQ |
| IndexIQ ETF Trust |
First Trust and IndexIQ ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IndexIQ ETF
The main advantage of trading using opposite First Trust and IndexIQ ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. ARK Autonomous Technology | First Trust vs. First Trust S Network | First Trust vs. FT Vest Equity | First Trust vs. Zillow Group Class |
| IndexIQ ETF vs. IndexIQ ETF Trust | IndexIQ ETF vs. IndexIQ ETF Trust | IndexIQ ETF vs. Invesco ESG NASDAQ | IndexIQ ETF vs. Invesco ESG NASDAQ |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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