Correlation Between Xtrackers International and IndexIQ Active

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

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

Diversification Opportunities for Xtrackers International and IndexIQ Active

0.71

Correlation Coefficient

Xtrackers International  IndexIQ Active

Poor diversification

The 3 months correlation between Xtrackers and IndexIQ is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers International Real and IndexIQ Active ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ Active ETF and Xtrackers International 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 Xtrackers International Real are associated (or correlated) with IndexIQ Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ Active ETF has no effect on the direction of Xtrackers International i.e., Xtrackers International and IndexIQ Active go up and down completely randomly.

Pair Corralation between Xtrackers International and IndexIQ Active

Given the investment horizon of 90 days Xtrackers International Real is expected to under-perform the IndexIQ Active. In addition to that, Xtrackers International is 1.45 times more volatile than IndexIQ Active ETF. It trades about -0.15 of its total potential returns per unit of risk. IndexIQ Active ETF is currently generating about -0.08 per unit of volatility. If you would invest  2,777  in IndexIQ Active ETF on September 13, 2024 and sell it today you would lose (92.00) from holding IndexIQ Active ETF or give up 3.31% of portfolio value over 90 days.

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

Xtrackers International Real  vs.  IndexIQ Active ETF

Xtrackers International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers International Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

IndexIQ Active ETF

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xtrackers International and IndexIQ Active

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

The idea behind Xtrackers International Real and IndexIQ Active ETF 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.