Correlation Between IQ MacKay and VSDM

Can any of the company-specific risk be diversified away by investing in both IQ MacKay and VSDM 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 VSDM 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 VSDM, you can compare the effects of market volatilities on IQ MacKay and VSDM 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 VSDM. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ MacKay and VSDM.

Diversification Opportunities for IQ MacKay and VSDM

0.71

Correlation Coefficient

IQ MacKay  VSDM

Poor diversification

The 3 months correlation between MMIN and VSDM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding IQ MacKay Municipal and VSDM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSDM 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 VSDM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VSDM has no effect on the direction of IQ MacKay i.e., IQ MacKay and VSDM go up and down completely randomly.

Pair Corralation between IQ MacKay and VSDM

Given the investment horizon of 90 days IQ MacKay Municipal is expected to under-perform the VSDM. In addition to that, IQ MacKay is 2.62 times more volatile than VSDM. It trades about -0.02 of its total potential returns per unit of risk. VSDM is currently generating about 0.13 per unit of volatility. If you would invest  7,460  in VSDM on December 17, 2024 and sell it today you would earn a total of  71.00  from holding VSDM or generate 0.95% return on investment over 90 days.

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

IQ MacKay Municipal  vs.  VSDM

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.

VSDM

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VSDM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, VSDM is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IQ MacKay and VSDM

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

The idea behind IQ MacKay Municipal and VSDM 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.