Correlation Between IShares SP and QQD

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

By analyzing existing cross correlation between iShares SP 500 and QQD, you can compare the effects of market volatilities on IShares SP and QQD 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 IShares SP with a short position of QQD. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and QQD.

Diversification Opportunities for IShares SP and QQD

0.69

Correlation Coefficient

IShares SP  QQD

Poor diversification

The 3 months correlation between IShares and QQD is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and QQD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QQD and IShares SP 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 iShares SP 500 are associated (or correlated) with QQD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QQD has no effect on the direction of IShares SP i.e., IShares SP and QQD go up and down completely randomly.

Pair Corralation between IShares SP and QQD

If you would invest  9,278  in iShares SP 500 on September 12, 2024 and sell it today you would earn a total of  1,037  from holding iShares SP 500 or generate 11.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

iShares SP 500  vs.  QQD

iShares SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, IShares SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

QQD

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares SP and QQD

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

The idea behind iShares SP 500 and QQD 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.