Correlation Between WisdomTree International and Cboe Vest

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

By analyzing existing cross correlation between WisdomTree International Al and Cboe Vest 10, you can compare the effects of market volatilities on WisdomTree International and Cboe Vest 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 WisdomTree International with a short position of Cboe Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and Cboe Vest.

Diversification Opportunities for WisdomTree International and Cboe Vest

-0.79

Correlation Coefficient

WisdomTree International  Cboe Vest

Pay attention - limited upside

The 3 months correlation between WisdomTree and Cboe is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Al and Cboe Vest 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Vest 10 and WisdomTree International 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 WisdomTree International Al are associated (or correlated) with Cboe Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Vest 10 has no effect on the direction of WisdomTree International i.e., WisdomTree International and Cboe Vest go up and down completely randomly.

Pair Corralation between WisdomTree International and Cboe Vest

Given the investment horizon of 90 days WisdomTree International Al is expected to generate 0.86 times more return on investment than Cboe Vest. However, WisdomTree International Al is 1.16 times less risky than Cboe Vest. It trades about 0.25 of its potential returns per unit of risk. Cboe Vest 10 is currently generating about -0.04 per unit of risk. If you would invest  3,920  in WisdomTree International Al on December 29, 2024 and sell it today you would earn a total of  508.00  from holding WisdomTree International Al or generate 12.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

WisdomTree International Al  vs.  Cboe Vest 10

WisdomTree International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Al are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, WisdomTree International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Cboe Vest 10

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cboe Vest 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cboe Vest is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree International and Cboe Vest

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

The idea behind WisdomTree International Al and Cboe Vest 10 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.