Correlation Between FT Cboe and Main Buywrite

Can any of the company-specific risk be diversified away by investing in both FT Cboe and Main Buywrite 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 Main Buywrite 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 Main Buywrite ETF, you can compare the effects of market volatilities on FT Cboe and Main Buywrite 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 Main Buywrite. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and Main Buywrite.

Diversification Opportunities for FT Cboe and Main Buywrite

-0.19

Correlation Coefficient

FT Cboe  Main Buywrite

Good diversification

The 3 months correlation between KNG and Main is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and Main Buywrite ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Buywrite ETF 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 Main Buywrite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Buywrite ETF has no effect on the direction of FT Cboe i.e., FT Cboe and Main Buywrite go up and down completely randomly.

Pair Corralation between FT Cboe and Main Buywrite

Considering the 90-day investment horizon FT Cboe Vest is expected to generate 2.05 times more return on investment than Main Buywrite. However, FT Cboe is 2.05 times more volatile than Main Buywrite ETF. It trades about 0.15 of its potential returns per unit of risk. Main Buywrite ETF is currently generating about -0.04 per unit of risk. If you would invest  5,061  in FT Cboe Vest on December 3, 2024 and sell it today you would earn a total of  79.00  from holding FT Cboe Vest or generate 1.56% return on investment over 90 days.

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

FT Cboe Vest  vs.  Main Buywrite ETF

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. Despite nearly stable basic indicators, FT Cboe is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Main Buywrite ETF

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Main Buywrite ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Main Buywrite is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with FT Cboe and Main Buywrite

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

The idea behind FT Cboe Vest and Main Buywrite ETF 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.