Correlation Between IQ MacKay and Formidable Fortress

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

By analyzing existing cross correlation between IQ MacKay Municipal and Formidable Fortress ETF, you can compare the effects of market volatilities on IQ MacKay and Formidable Fortress 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 IQ MacKay with a short position of Formidable Fortress. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ MacKay and Formidable Fortress.

Diversification Opportunities for IQ MacKay and Formidable Fortress

0.14

Correlation Coefficient

IQ MacKay  Formidable Fortress

Average diversification

The 3 months correlation between MMIN and Formidable is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding IQ MacKay Municipal and Formidable Fortress ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formidable Fortress ETF and IQ MacKay 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 IQ MacKay Municipal are associated (or correlated) with Formidable Fortress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formidable Fortress ETF has no effect on the direction of IQ MacKay i.e., IQ MacKay and Formidable Fortress go up and down completely randomly.

Pair Corralation between IQ MacKay and Formidable Fortress

Given the investment horizon of 90 days IQ MacKay Municipal is expected to under-perform the Formidable Fortress. But the etf apears to be less risky and, when comparing its historical volatility, IQ MacKay Municipal is 2.2 times less risky than Formidable Fortress. The etf trades about -0.04 of its potential returns per unit of risk. The Formidable Fortress ETF is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,904  in Formidable Fortress ETF on December 26, 2024 and sell it today you would lose (20.00) from holding Formidable Fortress ETF or give up 0.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

IQ MacKay Municipal  vs.  Formidable Fortress ETF

IQ MacKay Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days IQ MacKay Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, IQ MacKay is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Formidable Fortress ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Formidable Fortress ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Formidable Fortress is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IQ MacKay and Formidable Fortress

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

The idea behind IQ MacKay Municipal and Formidable Fortress 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.