Correlation Between KFA Mount and WisdomTree Managed

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

By analyzing existing cross correlation between KFA Mount Lucas and WisdomTree Managed Futures, you can compare the effects of market volatilities on KFA Mount and WisdomTree Managed 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 KFA Mount with a short position of WisdomTree Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of KFA Mount and WisdomTree Managed.

Diversification Opportunities for KFA Mount and WisdomTree Managed

-0.35

Correlation Coefficient

KFA Mount  WisdomTree Managed

Very good diversification

The 3 months correlation between KFA and WisdomTree is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding KFA Mount Lucas and WisdomTree Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Managed and KFA Mount 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 KFA Mount Lucas are associated (or correlated) with WisdomTree Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Managed has no effect on the direction of KFA Mount i.e., KFA Mount and WisdomTree Managed go up and down completely randomly.

Pair Corralation between KFA Mount and WisdomTree Managed

Given the investment horizon of 90 days KFA Mount Lucas is expected to generate 1.37 times more return on investment than WisdomTree Managed. However, KFA Mount is 1.37 times more volatile than WisdomTree Managed Futures. It trades about 0.16 of its potential returns per unit of risk. WisdomTree Managed Futures is currently generating about -0.06 per unit of risk. If you would invest  2,761  in KFA Mount Lucas on September 23, 2024 and sell it today you would earn a total of  59.00  from holding KFA Mount Lucas or generate 2.14% return on investment over 90 days.

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

KFA Mount Lucas  vs.  WisdomTree Managed Futures

KFA Mount Lucas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KFA Mount Lucas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, KFA Mount is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

WisdomTree Managed

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Managed Futures are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, WisdomTree Managed is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KFA Mount and WisdomTree Managed

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

The idea behind KFA Mount Lucas and WisdomTree Managed Futures 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.