Correlation Between WisdomTree Cocoa and Amundi Index

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

By analyzing existing cross correlation between WisdomTree Cocoa and Amundi Index Solutions, you can compare the effects of market volatilities on WisdomTree Cocoa and Amundi Index 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 Cocoa with a short position of Amundi Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Cocoa and Amundi Index.

Diversification Opportunities for WisdomTree Cocoa and Amundi Index

0.81

Correlation Coefficient

WisdomTree Cocoa  Amundi Index

Very poor diversification

The 3 months correlation between WisdomTree and Amundi is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Cocoa and Amundi Index Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi Index Solutions and WisdomTree Cocoa 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 Cocoa are associated (or correlated) with Amundi Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi Index Solutions has no effect on the direction of WisdomTree Cocoa i.e., WisdomTree Cocoa and Amundi Index go up and down completely randomly.

Pair Corralation between WisdomTree Cocoa and Amundi Index

Assuming the 90 days trading horizon WisdomTree Cocoa is expected to generate 8.63 times more return on investment than Amundi Index. However, WisdomTree Cocoa is 8.63 times more volatile than Amundi Index Solutions. It trades about 0.15 of its potential returns per unit of risk. Amundi Index Solutions is currently generating about 0.06 per unit of risk. If you would invest  1,544  in WisdomTree Cocoa on October 9, 2024 and sell it today you would earn a total of  189.00  from holding WisdomTree Cocoa or generate 12.24% return on investment over 90 days.

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

WisdomTree Cocoa  vs.  Amundi Index Solutions

WisdomTree Cocoa

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Cocoa are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Cocoa unveiled solid returns over the last few months and may actually be approaching a breakup point.

Amundi Index Solutions

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with WisdomTree Cocoa and Amundi Index

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

The idea behind WisdomTree Cocoa and Amundi Index Solutions 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.