Correlation Between Invesco KBW and IndexIQ

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

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

Diversification Opportunities for Invesco KBW and IndexIQ

0.61

Correlation Coefficient

Invesco KBW  IndexIQ

Poor diversification

The 3 months correlation between Invesco and IndexIQ is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Invesco KBW Premium and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and Invesco KBW 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 Invesco KBW Premium 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 Invesco KBW i.e., Invesco KBW and IndexIQ go up and down completely randomly.

Pair Corralation between Invesco KBW and IndexIQ

Given the investment horizon of 90 days Invesco KBW is expected to generate 2.72 times less return on investment than IndexIQ. In addition to that, Invesco KBW is 1.39 times more volatile than IndexIQ. It trades about 0.01 of its total potential returns per unit of risk. IndexIQ is currently generating about 0.02 per unit of volatility. If you would invest  1,897  in IndexIQ on October 10, 2024 and sell it today you would earn a total of  178.00  from holding IndexIQ or generate 9.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.94%
Values	Daily Returns

Invesco KBW Premium  vs.  IndexIQ

Invesco KBW Premium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco KBW Premium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing 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. Despite nearly stable basic indicators, IndexIQ is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco KBW and IndexIQ

The main advantage of trading using opposite Invesco KBW and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco KBW 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 Invesco KBW Premium 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.