Correlation Between Dimensional ETF and IndexIQ Active

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

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

Diversification Opportunities for Dimensional ETF and IndexIQ Active

0.97

Correlation Coefficient

Dimensional ETF  IndexIQ Active

Almost no diversification

The 3 months correlation between Dimensional and IndexIQ is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust 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 Dimensional ETF 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 Dimensional ETF Trust 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 Dimensional ETF i.e., Dimensional ETF and IndexIQ Active go up and down completely randomly.

Pair Corralation between Dimensional ETF and IndexIQ Active

Given the investment horizon of 90 days Dimensional ETF Trust is expected to under-perform the IndexIQ Active. But the etf apears to be less risky and, when comparing its historical volatility, Dimensional ETF Trust is 1.43 times less risky than IndexIQ Active. The etf trades about -0.01 of its potential returns per unit of risk. The IndexIQ Active ETF is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,126  in IndexIQ Active ETF on December 30, 2024 and sell it today you would earn a total of  4.00  from holding IndexIQ Active ETF or generate 0.19% return on investment over 90 days.

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

Dimensional ETF Trust  vs.  IndexIQ Active ETF

Dimensional ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dimensional ETF is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

IndexIQ Active ETF

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IndexIQ Active ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, IndexIQ Active is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dimensional ETF and IndexIQ Active

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

The idea behind Dimensional ETF Trust and IndexIQ Active ETF 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 Global Correlations module to find global opportunities by holding instruments from different markets.