Correlation Between Barclays ETN and IndexIQ

Can any of the company-specific risk be diversified away by investing in both Barclays ETN 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 Barclays ETN and IndexIQ into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barclays ETN Select and IndexIQ, you can compare the effects of market volatilities on Barclays ETN 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 Barclays ETN with a short position of IndexIQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barclays ETN and IndexIQ.

Diversification Opportunities for Barclays ETN and IndexIQ

-0.31

Correlation Coefficient

Barclays ETN  IndexIQ

Very good diversification

The 3 months correlation between Barclays and IndexIQ is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Barclays ETN Select and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and Barclays ETN 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 Barclays ETN Select 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 Barclays ETN i.e., Barclays ETN and IndexIQ go up and down completely randomly.

Pair Corralation between Barclays ETN and IndexIQ

Given the investment horizon of 90 days Barclays ETN Select is expected to generate 0.84 times more return on investment than IndexIQ. However, Barclays ETN Select is 1.19 times less risky than IndexIQ. It trades about 0.12 of its potential returns per unit of risk. IndexIQ is currently generating about 0.02 per unit of risk. If you would invest  1,739  in Barclays ETN Select on October 10, 2024 and sell it today you would earn a total of  1,153  from holding Barclays ETN Select or generate 66.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Barclays ETN Select  vs.  IndexIQ

Barclays ETN Select

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays ETN Select are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Barclays ETN may actually be approaching a critical reversion point that can send shares even higher in February 2025.

IndexIQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IndexIQ is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Barclays ETN and IndexIQ

The main advantage of trading using opposite Barclays ETN and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays ETN 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 Barclays ETN Select 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..