Correlation Between IShares Basic and IndexIQ

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

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

Diversification Opportunities for IShares Basic and IndexIQ

-0.34

Correlation Coefficient

IShares Basic  IndexIQ

Very good diversification

The 3 months correlation between IShares and IndexIQ is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding iShares Basic Materials and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and IShares Basic 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 Basic Materials 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 IShares Basic i.e., IShares Basic and IndexIQ go up and down completely randomly.

Pair Corralation between IShares Basic and IndexIQ

Considering the 90-day investment horizon IShares Basic is expected to generate 1.27 times less return on investment than IndexIQ. In addition to that, IShares Basic is 1.01 times more volatile than IndexIQ. It trades about 0.02 of its total potential returns per unit of risk. IndexIQ is currently generating about 0.03 per unit of volatility. If you would invest  3,288  in IndexIQ on September 20, 2024 and sell it today you would earn a total of  108.00  from holding IndexIQ or generate 3.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.28%
Values	Daily Returns

iShares Basic Materials  vs.  IndexIQ

iShares Basic Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Basic Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest sluggish performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF 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. In spite of comparatively stable technical and fundamental indicators, IndexIQ 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 IShares Basic and IndexIQ

The main advantage of trading using opposite IShares Basic and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Basic 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 iShares Basic Materials 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.