Correlation Between IQ Hedge and SPDR SP

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

By analyzing existing cross correlation between IQ Hedge Multi Strategy and SPDR SP Global, you can compare the effects of market volatilities on IQ Hedge and SPDR SP 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 Hedge with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ Hedge and SPDR SP.

Diversification Opportunities for IQ Hedge and SPDR SP

-0.49

Correlation Coefficient

IQ Hedge  SPDR SP

Very good diversification

The 3 months correlation between QAI and SPDR is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding IQ Hedge Multi Strategy and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global and IQ Hedge 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 Hedge Multi Strategy are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Global has no effect on the direction of IQ Hedge i.e., IQ Hedge and SPDR SP go up and down completely randomly.

Pair Corralation between IQ Hedge and SPDR SP

Considering the 90-day investment horizon IQ Hedge Multi Strategy is expected to generate 0.29 times more return on investment than SPDR SP. However, IQ Hedge Multi Strategy is 3.42 times less risky than SPDR SP. It trades about 0.09 of its potential returns per unit of risk. SPDR SP Global is currently generating about -0.22 per unit of risk. If you would invest  3,217  in IQ Hedge Multi Strategy on September 19, 2024 and sell it today you would earn a total of  28.00  from holding IQ Hedge Multi Strategy or generate 0.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

IQ Hedge Multi Strategy  vs.  SPDR SP Global

IQ Hedge Multi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IQ Hedge Multi Strategy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IQ Hedge is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

SPDR SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with IQ Hedge and SPDR SP

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

The idea behind IQ Hedge Multi Strategy and SPDR SP Global 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.