Correlation Between WisdomTree Cocoa and Invesco FTSE

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

By analyzing existing cross correlation between WisdomTree Cocoa and Invesco FTSE Emerging, you can compare the effects of market volatilities on WisdomTree Cocoa and Invesco FTSE 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 Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Cocoa and Invesco FTSE.

Diversification Opportunities for WisdomTree Cocoa and Invesco FTSE

-0.44

Correlation Coefficient

WisdomTree Cocoa  Invesco FTSE

Very good diversification

The 3 months correlation between WisdomTree and Invesco is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Cocoa and Invesco FTSE Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE Emerging 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 Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE Emerging has no effect on the direction of WisdomTree Cocoa i.e., WisdomTree Cocoa and Invesco FTSE go up and down completely randomly.

Pair Corralation between WisdomTree Cocoa and Invesco FTSE

Assuming the 90 days trading horizon WisdomTree Cocoa is expected to under-perform the Invesco FTSE. In addition to that, WisdomTree Cocoa is 7.34 times more volatile than Invesco FTSE Emerging. It trades about -0.31 of its total potential returns per unit of risk. Invesco FTSE Emerging is currently generating about 0.03 per unit of volatility. If you would invest  2,298  in Invesco FTSE Emerging on December 4, 2024 and sell it today you would earn a total of  8.00  from holding Invesco FTSE Emerging or generate 0.35% return on investment over 90 days.

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

WisdomTree Cocoa  vs.  Invesco FTSE Emerging

WisdomTree Cocoa

Risk-Adjusted Performance

Weak

Over the last 90 days WisdomTree Cocoa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Invesco FTSE Emerging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco FTSE Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Invesco FTSE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WisdomTree Cocoa and Invesco FTSE

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

The idea behind WisdomTree Cocoa and Invesco FTSE Emerging 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.