Correlation Between First Trust and IndexIQ

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

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

Diversification Opportunities for First Trust and IndexIQ

0.59

Correlation Coefficient

First Trust  IndexIQ

Very weak diversification

The 3 months correlation between First and IndexIQ is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and First Trust 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 First Trust Dorsey 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 First Trust i.e., First Trust and IndexIQ go up and down completely randomly.

Pair Corralation between First Trust and IndexIQ

If you would invest  2,233  in First Trust Dorsey on July 19, 2024 and sell it today you would earn a total of  332.00  from holding First Trust Dorsey or generate 14.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.8%
Values	Daily Returns

First Trust Dorsey  vs.  IndexIQ

First Trust Dorsey

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dorsey are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in November 2024.

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 quite persistent primary indicators, IndexIQ is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with First Trust and IndexIQ

The main advantage of trading using opposite First Trust and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Dorsey 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.