Correlation Between ETRACS Quarterly and IndexIQ

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

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

Diversification Opportunities for ETRACS Quarterly and IndexIQ

-0.37

Correlation Coefficient

ETRACS Quarterly  IndexIQ

Very good diversification

The 3 months correlation between ETRACS and IndexIQ is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Quarterly Pay and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and ETRACS Quarterly 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 ETRACS Quarterly Pay 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 ETRACS Quarterly i.e., ETRACS Quarterly and IndexIQ go up and down completely randomly.

Pair Corralation between ETRACS Quarterly and IndexIQ

Given the investment horizon of 90 days ETRACS Quarterly Pay is expected to generate 1.27 times more return on investment than IndexIQ. However, ETRACS Quarterly is 1.27 times more volatile than IndexIQ. It trades about 0.09 of its potential returns per unit of risk. IndexIQ is currently generating about 0.02 per unit of risk. If you would invest  3,550  in ETRACS Quarterly Pay on October 10, 2024 and sell it today you would earn a total of  2,532  from holding ETRACS Quarterly Pay or generate 71.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

ETRACS Quarterly Pay  vs.  IndexIQ

ETRACS Quarterly Pay

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Quarterly Pay are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ETRACS Quarterly may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 ETRACS Quarterly and IndexIQ

The main advantage of trading using opposite ETRACS Quarterly and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS Quarterly 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 ETRACS Quarterly Pay 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.