Correlation Between MicroSectors FANG and IndexIQ

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG 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 MicroSectors FANG and IndexIQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and IndexIQ, you can compare the effects of market volatilities on MicroSectors FANG 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 MicroSectors FANG with a short position of IndexIQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and IndexIQ.

Diversification Opportunities for MicroSectors FANG and IndexIQ

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between MicroSectors and IndexIQ is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and MicroSectors FANG 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 MicroSectors FANG Index 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 MicroSectors FANG i.e., MicroSectors FANG and IndexIQ go up and down completely randomly.

Pair Corralation between MicroSectors FANG and IndexIQ

If you would invest  42,800  in MicroSectors FANG Index on September 19, 2024 and sell it today you would earn a total of  23,395  from holding MicroSectors FANG Index or generate 54.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy0.79%
ValuesDaily Returns

MicroSectors FANG Index  vs.  IndexIQ

 Performance 
       Timeline  
MicroSectors FANG Index 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MicroSectors FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.
IndexIQ 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IndexIQ is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

MicroSectors FANG and IndexIQ Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MicroSectors FANG and IndexIQ

The main advantage of trading using opposite MicroSectors FANG and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG 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 MicroSectors FANG Index 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

Other Complementary Tools

Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
ETFs
Find actively traded Exchange Traded Funds (ETF) from around the world
Pattern Recognition
Use different Pattern Recognition models to time the market across multiple global exchanges
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital