Correlation Between ALPS Clean and IndexIQ ETF

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

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

Diversification Opportunities for ALPS Clean and IndexIQ ETF

0.93

Correlation Coefficient

ALPS Clean  IndexIQ ETF

Almost no diversification

The 3 months correlation between ALPS and IndexIQ is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ALPS Clean Energy and IndexIQ ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ ETF Trust and ALPS Clean 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 ALPS Clean Energy are associated (or correlated) with IndexIQ ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ ETF Trust has no effect on the direction of ALPS Clean i.e., ALPS Clean and IndexIQ ETF go up and down completely randomly.

Pair Corralation between ALPS Clean and IndexIQ ETF

Given the investment horizon of 90 days ALPS Clean Energy is expected to generate 2.38 times more return on investment than IndexIQ ETF. However, ALPS Clean is 2.38 times more volatile than IndexIQ ETF Trust. It trades about 0.15 of its potential returns per unit of risk. IndexIQ ETF Trust is currently generating about 0.09 per unit of risk. If you would invest  2,883  in ALPS Clean Energy on March 11, 2024 and sell it today you would earn a total of  180.00  from holding ALPS Clean Energy or generate 6.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

ALPS Clean Energy  vs.  IndexIQ ETF Trust

ALPS Clean Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ALPS Clean Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, ALPS Clean is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

IndexIQ ETF Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IndexIQ ETF Trust are ranked lower than 4 (%) 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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ALPS Clean and IndexIQ ETF

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

The idea behind ALPS Clean Energy and IndexIQ ETF Trust 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.