Correlation Between Ethereum and IndexIQ

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

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

Diversification Opportunities for Ethereum and IndexIQ

-0.36

Correlation Coefficient

Ethereum  IndexIQ

Very good diversification

The 3 months correlation between Ethereum and IndexIQ is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and Ethereum 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 Ethereum 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 Ethereum i.e., Ethereum and IndexIQ go up and down completely randomly.

Pair Corralation between Ethereum and IndexIQ

Assuming the 90 days trading horizon Ethereum is expected to generate 6.35 times more return on investment than IndexIQ. However, Ethereum is 6.35 times more volatile than IndexIQ. It trades about 0.06 of its potential returns per unit of risk. IndexIQ is currently generating about 0.02 per unit of risk. If you would invest  165,902  in Ethereum on October 10, 2024 and sell it today you would earn a total of  175,338  from holding Ethereum or generate 105.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.87%
Values	Daily Returns

Ethereum  vs.  IndexIQ

Ethereum

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Ethereum and IndexIQ

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

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.