Correlation Between Vident Core and IndexIQ Active

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

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

Diversification Opportunities for Vident Core and IndexIQ Active

0.99

Correlation Coefficient

Vident Core  IndexIQ Active

No risk reduction

The 3 months correlation between Vident and IndexIQ is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vident Core Bond and IndexIQ Active ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ Active ETF and Vident Core 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 Vident Core Bond are associated (or correlated) with IndexIQ Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ Active ETF has no effect on the direction of Vident Core i.e., Vident Core and IndexIQ Active go up and down completely randomly.

Pair Corralation between Vident Core and IndexIQ Active

Given the investment horizon of 90 days Vident Core is expected to generate 1.11 times less return on investment than IndexIQ Active. In addition to that, Vident Core is 1.18 times more volatile than IndexIQ Active ETF. It trades about 0.11 of its total potential returns per unit of risk. IndexIQ Active ETF is currently generating about 0.15 per unit of volatility. If you would invest  2,532  in IndexIQ Active ETF on December 28, 2024 and sell it today you would earn a total of  68.00  from holding IndexIQ Active ETF or generate 2.69% return on investment over 90 days.

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

Vident Core Bond  vs.  IndexIQ Active ETF

Vident Core Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vident Core Bond are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vident Core is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

IndexIQ Active ETF

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IndexIQ Active ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, IndexIQ Active is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vident Core and IndexIQ Active

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

The idea behind Vident Core Bond and IndexIQ Active ETF 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.