Correlation Between US Diversified and IndexIQ

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

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

Diversification Opportunities for US Diversified and IndexIQ

0.0

Correlation Coefficient

US Diversified  IndexIQ

Pay attention - limited upside

The 3 months correlation between PPTY and IndexIQ is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding US Diversified Real and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and US Diversified 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 US Diversified Real 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 US Diversified i.e., US Diversified and IndexIQ go up and down completely randomly.

Pair Corralation between US Diversified and IndexIQ

If you would invest (100.00) in IndexIQ on December 1, 2024 and sell it today you would earn a total of  100.00  from holding IndexIQ or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

US Diversified Real  vs.  IndexIQ

US Diversified Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Diversified Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, US Diversified is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

IndexIQ

Risk-Adjusted Performance

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 US Diversified and IndexIQ

The main advantage of trading using opposite US Diversified and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Diversified 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 US Diversified Real 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.