Correlation Between SPDR SP and IQ Merger

Can any of the company-specific risk be diversified away by investing in both SPDR SP and IQ Merger 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 IQ Merger 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 IQ Merger Arbitrage, you can compare the effects of market volatilities on SPDR SP and IQ Merger 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 IQ Merger. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and IQ Merger.

Diversification Opportunities for SPDR SP and IQ Merger

0.34

Correlation Coefficient

SPDR SP  IQ Merger

Weak diversification

The 3 months correlation between SPDR and MNA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Global and IQ Merger Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Merger Arbitrage 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 IQ Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Merger Arbitrage has no effect on the direction of SPDR SP i.e., SPDR SP and IQ Merger go up and down completely randomly.

Pair Corralation between SPDR SP and IQ Merger

Considering the 90-day investment horizon SPDR SP Global is expected to under-perform the IQ Merger. In addition to that, SPDR SP is 3.68 times more volatile than IQ Merger Arbitrage. It trades about -0.03 of its total potential returns per unit of risk. IQ Merger Arbitrage is currently generating about 0.07 per unit of volatility. If you would invest  3,138  in IQ Merger Arbitrage on September 19, 2024 and sell it today you would earn a total of  149.00  from holding IQ Merger Arbitrage or generate 4.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

SPDR SP Global  vs.  IQ Merger Arbitrage

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.

IQ Merger Arbitrage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SPDR SP and IQ Merger

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

The idea behind SPDR SP Global and IQ Merger Arbitrage 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.