Correlation Between Xtrackers MSCI and IndexIQ

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

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

Diversification Opportunities for Xtrackers MSCI and IndexIQ

0.0

Correlation Coefficient

Xtrackers MSCI  IndexIQ

Pay attention - limited upside

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

Pair Corralation between Xtrackers MSCI and IndexIQ

If you would invest (100.00) in IndexIQ on December 3, 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

Xtrackers MSCI USA  vs.  IndexIQ

Xtrackers MSCI USA

Risk-Adjusted Performance

Very Weak

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

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. In spite of very healthy forward indicators, IndexIQ is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Xtrackers MSCI and IndexIQ

The main advantage of trading using opposite Xtrackers MSCI and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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 Xtrackers MSCI USA 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.