Correlation Between Xtrackers California and IQ MacKay

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

By analyzing existing cross correlation between Xtrackers California Municipal and IQ MacKay Municipal, you can compare the effects of market volatilities on Xtrackers California and IQ MacKay 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 Xtrackers California with a short position of IQ MacKay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers California and IQ MacKay.

Diversification Opportunities for Xtrackers California and IQ MacKay

0.92

Correlation Coefficient

Xtrackers California  IQ MacKay

Almost no diversification

The 3 months correlation between Xtrackers and MMIT is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers California Municipal and IQ MacKay Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ MacKay Municipal and Xtrackers California 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 Xtrackers California Municipal are associated (or correlated) with IQ MacKay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ MacKay Municipal has no effect on the direction of Xtrackers California i.e., Xtrackers California and IQ MacKay go up and down completely randomly.

Pair Corralation between Xtrackers California and IQ MacKay

Allowing for the 90-day total investment horizon Xtrackers California Municipal is expected to under-perform the IQ MacKay. In addition to that, Xtrackers California is 1.5 times more volatile than IQ MacKay Municipal. It trades about -0.27 of its total potential returns per unit of risk. IQ MacKay Municipal is currently generating about -0.36 per unit of volatility. If you would invest  2,439  in IQ MacKay Municipal on October 10, 2024 and sell it today you would lose (38.00) from holding IQ MacKay Municipal or give up 1.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Xtrackers California Municipal  vs.  IQ MacKay Municipal

Xtrackers California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers California Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xtrackers California is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

IQ MacKay Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IQ MacKay Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, IQ MacKay is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Xtrackers California and IQ MacKay

The main advantage of trading using opposite Xtrackers California and IQ MacKay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers California position performs unexpectedly, IQ MacKay 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 IQ MacKay will offset losses from the drop in IQ MacKay's long position.

The idea behind Xtrackers California Municipal and IQ MacKay Municipal 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.