Correlation Between IQ Healthy and SPDR Kensho

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

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

Diversification Opportunities for IQ Healthy and SPDR Kensho

0.11

Correlation Coefficient

IQ Healthy  SPDR Kensho

Average diversification

The 3 months correlation between HART and SPDR is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding IQ Healthy Hearts and SPDR Kensho Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Future and IQ Healthy 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 IQ Healthy Hearts are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Future has no effect on the direction of IQ Healthy i.e., IQ Healthy and SPDR Kensho go up and down completely randomly.

Pair Corralation between IQ Healthy and SPDR Kensho

Given the investment horizon of 90 days IQ Healthy Hearts is expected to generate 0.49 times more return on investment than SPDR Kensho. However, IQ Healthy Hearts is 2.06 times less risky than SPDR Kensho. It trades about 0.04 of its potential returns per unit of risk. SPDR Kensho Future is currently generating about -0.04 per unit of risk. If you would invest  3,104  in IQ Healthy Hearts on December 26, 2024 and sell it today you would earn a total of  43.00  from holding IQ Healthy Hearts or generate 1.39% return on investment over 90 days.

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

IQ Healthy Hearts  vs.  SPDR Kensho Future

IQ Healthy Hearts

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IQ Healthy Hearts are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IQ Healthy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR Kensho Future

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho Future has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SPDR Kensho is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IQ Healthy and SPDR Kensho

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

The idea behind IQ Healthy Hearts and SPDR Kensho Future 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.