Correlation Between FT Cboe and ETRACS 2xMonthly

Can any of the company-specific risk be diversified away by investing in both FT Cboe and ETRACS 2xMonthly 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 FT Cboe and ETRACS 2xMonthly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FT Cboe Vest and ETRACS 2xMonthly Pay, you can compare the effects of market volatilities on FT Cboe and ETRACS 2xMonthly 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 FT Cboe with a short position of ETRACS 2xMonthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and ETRACS 2xMonthly.

Diversification Opportunities for FT Cboe and ETRACS 2xMonthly

0.42

Correlation Coefficient

FT Cboe  ETRACS 2xMonthly

Very weak diversification

The 3 months correlation between DSEP and ETRACS is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and ETRACS 2xMonthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS 2xMonthly Pay and FT Cboe 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 FT Cboe Vest are associated (or correlated) with ETRACS 2xMonthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS 2xMonthly Pay has no effect on the direction of FT Cboe i.e., FT Cboe and ETRACS 2xMonthly go up and down completely randomly.

Pair Corralation between FT Cboe and ETRACS 2xMonthly

Given the investment horizon of 90 days FT Cboe Vest is expected to under-perform the ETRACS 2xMonthly. But the etf apears to be less risky and, when comparing its historical volatility, FT Cboe Vest is 2.92 times less risky than ETRACS 2xMonthly. The etf trades about -0.06 of its potential returns per unit of risk. The ETRACS 2xMonthly Pay is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  879.00  in ETRACS 2xMonthly Pay on December 27, 2024 and sell it today you would earn a total of  20.00  from holding ETRACS 2xMonthly Pay or generate 2.28% return on investment over 90 days.

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

FT Cboe Vest  vs.  ETRACS 2xMonthly Pay

FT Cboe Vest

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, FT Cboe is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

ETRACS 2xMonthly Pay

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS 2xMonthly Pay are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, ETRACS 2xMonthly is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with FT Cboe and ETRACS 2xMonthly

The main advantage of trading using opposite FT Cboe and ETRACS 2xMonthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe position performs unexpectedly, ETRACS 2xMonthly 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 ETRACS 2xMonthly will offset losses from the drop in ETRACS 2xMonthly's long position.

The idea behind FT Cboe Vest and ETRACS 2xMonthly Pay 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.