Correlation Between IQ Hedge and SP 500

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Can any of the company-specific risk be diversified away by investing in both IQ Hedge and SP 500 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 IQ Hedge and SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IQ Hedge Multi-Strategy and SP 500 Ishares, you can compare the effects of market volatilities on IQ Hedge and SP 500 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 IQ Hedge with a short position of SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ Hedge and SP 500.

Diversification Opportunities for IQ Hedge and SP 500

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between IQ Hedge and SP 500 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding IQ Hedge Multi-Strategy and SP 500 Ishares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 Ishares and IQ Hedge 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 IQ Hedge Multi-Strategy are associated (or correlated) with SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 Ishares has no effect on the direction of IQ Hedge i.e., IQ Hedge and SP 500 go up and down completely randomly.

Pair Corralation between IQ Hedge and SP 500

Considering the 90-day investment horizon IQ Hedge Multi-Strategy is expected to under-perform the SP 500. But the etf apears to be less risky and, when comparing its historical volatility, IQ Hedge Multi-Strategy is 2.86 times less risky than SP 500. The etf trades about -0.01 of its potential returns per unit of risk. The SP 500 Ishares is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  33,990  in SP 500 Ishares on May 19, 2022 and sell it today you would earn a total of  9,214  from holding SP 500 Ishares or generate 27.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

IQ Hedge Multi-Strategy  vs.  SP 500 Ishares

 Performance (%) 
       Timeline  
IQ Hedge Multi-Strategy 
IQ Hedge Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in IQ Hedge Multi-Strategy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IQ Hedge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

IQ Hedge Price Channel

SP 500 Ishares 
SP 500 Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SP 500 Ishares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SP 500 may actually be approaching a critical reversion point that can send shares even higher in September 2022.

SP 500 Price Channel

IQ Hedge and SP 500 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IQ Hedge and SP 500

The main advantage of trading using opposite IQ Hedge and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IQ Hedge position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.

IQ Hedge Multi-Strategy

Pair trading matchups for IQ Hedge

The idea behind IQ Hedge Multi-Strategy and SP 500 Ishares 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.

SP 500 Ishares

Pair trading matchups for SP 500

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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