Correlation Between Overlay Shares and IQ MacKay

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

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

Diversification Opportunities for Overlay Shares and IQ MacKay

0.02

Correlation Coefficient

Overlay Shares  IQ MacKay

Significant diversification

The 3 months correlation between Overlay and MMIT is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Overlay Shares Large and IQ MacKay Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ MacKay Municipal and Overlay Shares 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 Overlay Shares Large are associated (or correlated) with IQ MacKay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ MacKay Municipal has no effect on the direction of Overlay Shares i.e., Overlay Shares and IQ MacKay go up and down completely randomly.

Pair Corralation between Overlay Shares and IQ MacKay

Considering the 90-day investment horizon Overlay Shares Large is expected to under-perform the IQ MacKay. In addition to that, Overlay Shares is 5.69 times more volatile than IQ MacKay Municipal. It trades about -0.06 of its total potential returns per unit of risk. IQ MacKay Municipal is currently generating about 0.05 per unit of volatility. If you would invest  2,393  in IQ MacKay Municipal on December 18, 2024 and sell it today you would earn a total of  14.00  from holding IQ MacKay Municipal or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Overlay Shares Large  vs.  IQ MacKay Municipal

Overlay Shares Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Overlay Shares Large has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Overlay Shares is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

IQ MacKay Municipal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IQ MacKay Municipal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, IQ MacKay is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Overlay Shares and IQ MacKay

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

The idea behind Overlay Shares Large and IQ MacKay Municipal 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.