Correlation Between IShares International and IndexIQ Active

Can any of the company-specific risk be diversified away by investing in both IShares 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 IShares 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 iShares International Developed and IndexIQ Active ETF, you can compare the effects of market volatilities on IShares 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 IShares International with a short position of IndexIQ Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares International and IndexIQ Active.

Diversification Opportunities for IShares International and IndexIQ Active

0.82

Correlation Coefficient

IShares International  IndexIQ Active

Very poor diversification

The 3 months correlation between IShares and IndexIQ is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Develope 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 IShares 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 iShares International Developed 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 IShares International i.e., IShares International and IndexIQ Active go up and down completely randomly.

Pair Corralation between IShares International and IndexIQ Active

Given the investment horizon of 90 days IShares International is expected to generate 1.01 times less return on investment than IndexIQ Active. In addition to that, IShares International is 1.12 times more volatile than IndexIQ Active ETF. It trades about 0.07 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  2,555  in IndexIQ Active ETF on December 29, 2024 and sell it today you would earn a total of  86.00  from holding IndexIQ Active ETF or generate 3.37% return on investment over 90 days.

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

iShares International Develope  vs.  IndexIQ Active ETF

iShares International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares International Developed are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, IShares International is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

IndexIQ Active ETF

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IndexIQ Active ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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 IShares International and IndexIQ Active

The main advantage of trading using opposite IShares International and IndexIQ Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 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 iShares International Developed 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.