Correlation Between Real Estate and IndexIQ

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

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

Diversification Opportunities for Real Estate and IndexIQ

-0.37

Correlation Coefficient

Real Estate  IndexIQ

Very good diversification

The 3 months correlation between Real and IndexIQ is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding The Real Estate and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and Real Estate 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 The Real Estate 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 Real Estate i.e., Real Estate and IndexIQ go up and down completely randomly.

Pair Corralation between Real Estate and IndexIQ

Given the investment horizon of 90 days The Real Estate is expected to generate 1.43 times more return on investment than IndexIQ. However, Real Estate is 1.43 times more volatile than IndexIQ. It trades about -0.07 of its potential returns per unit of risk. IndexIQ is currently generating about -0.22 per unit of risk. If you would invest  4,395  in The Real Estate on October 24, 2024 and sell it today you would lose (212.00) from holding The Real Estate or give up 4.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	35.59%
Values	Daily Returns

The Real Estate  vs.  IndexIQ

Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Real Estate is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

IndexIQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with Real Estate and IndexIQ

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

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.