Correlation Between SPDR SP and IndexIQ

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

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

Diversification Opportunities for SPDR SP and IndexIQ

-0.83

Correlation Coefficient

SPDR SP  IndexIQ

Pay attention - limited upside

The 3 months correlation between SPDR and IndexIQ is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Global and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and SPDR SP 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 SPDR SP Global 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 SPDR SP i.e., SPDR SP and IndexIQ go up and down completely randomly.

Pair Corralation between SPDR SP and IndexIQ

Considering the 90-day investment horizon SPDR SP Global is expected to under-perform the IndexIQ. In addition to that, SPDR SP is 2.79 times more volatile than IndexIQ. It trades about -0.01 of its total potential returns per unit of risk. IndexIQ is currently generating about 0.11 per unit of volatility. If you would invest  2,427  in IndexIQ on September 20, 2024 and sell it today you would earn a total of  149.00  from holding IndexIQ or generate 6.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	28.48%
Values	Daily Returns

SPDR SP Global  vs.  IndexIQ

SPDR SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

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 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.

Pair Trading with SPDR SP and IndexIQ

The main advantage of trading using opposite SPDR SP and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP Global 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 Transaction History module to view history of all your transactions and understand their impact on performance.