Can any of the company-specific risk be diversified away by investing in both IndexIQ ETF and Nushares ETF 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 IndexIQ ETF and Nushares ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IndexIQ ETF Trust and Nushares ETF Trust, you can compare the effects of market volatilities on IndexIQ ETF and Nushares ETF 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 IndexIQ ETF with a short position of Nushares ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IndexIQ ETF and Nushares ETF.
Diversification Opportunities for IndexIQ ETF and Nushares ETF
The 3 months correlation between IndexIQ and Nushares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding IndexIQ ETF Trust and Nushares ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nushares ETF Trust and IndexIQ ETF 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 IndexIQ ETF Trust are associated (or correlated) with Nushares ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nushares ETF Trust has no effect on the direction of IndexIQ ETF i.e., IndexIQ ETF and Nushares ETF go up and down completely randomly.
Pair Corralation between IndexIQ ETF and Nushares ETF
Given the investment horizon of 90 days IndexIQ ETF Trust is expected to generate 1.18 times more return on investment than Nushares ETF. However, IndexIQ ETF is 1.18 times more volatile than Nushares ETF Trust. It trades about 0.19 of its potential returns per unit of risk. Nushares ETF Trust is currently generating about 0.06 per unit of risk. If you would invest 2,331 in IndexIQ ETF Trust on March 6, 2024 and sell it today you would earn a total of 72.00 from holding IndexIQ ETF Trust or generate 3.09% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in IndexIQ ETF Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IndexIQ ETF is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Nushares ETF Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Nushares ETF is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.