Correlation Between IQ Hedge and Total Stock

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Can any of the company-specific risk be diversified away by investing in both IQ Hedge and Total Stock 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 Total Stock 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 Total Stock Market, you can compare the effects of market volatilities on IQ Hedge and Total Stock 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 Total Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ Hedge and Total Stock.

Diversification Opportunities for IQ Hedge and Total Stock

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between IQ Hedge and Total is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding IQ Hedge Multi-Strategy and Total Stock Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Stock Market 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 Total Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Stock Market has no effect on the direction of IQ Hedge i.e., IQ Hedge and Total Stock go up and down completely randomly.

Pair Corralation between IQ Hedge and Total Stock

Considering the 90-day investment horizon IQ Hedge Multi-Strategy is expected to under-perform the Total Stock. But the etf apears to be less risky and, when comparing its historical volatility, IQ Hedge Multi-Strategy is 2.9 times less risky than Total Stock. The etf trades about 0.0 of its potential returns per unit of risk. The Total Stock Market is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  16,004  in Total Stock Market on May 16, 2022 and sell it today you would earn a total of  5,490  from holding Total Stock Market or generate 34.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

IQ Hedge Multi-Strategy  vs.  Total Stock Market

 Performance (%) 
       Timeline  
IQ Hedge Multi-Strategy 
IQ Hedge Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in IQ Hedge Multi-Strategy are ranked lower than 4 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

IQ Hedge Price Channel

Total Stock Market 
Total Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Total Stock Market are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Total Stock may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Total Price Channel

IQ Hedge and Total Stock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IQ Hedge and Total Stock

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

IQ Hedge Multi-Strategy

Pair trading matchups for IQ Hedge

The idea behind IQ Hedge Multi-Strategy and Total Stock Market 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.

Total Stock Market

Pair trading matchups for Total Stock

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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