Correlation Between FT Cboe and International Drawdown

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

Diversification Opportunities for FT Cboe and International Drawdown

0.62

Correlation Coefficient

FT Cboe  International Drawdown

Poor diversification

The 3 months correlation between KNG and International is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and International Drawdown Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Drawdown 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 International Drawdown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Drawdown has no effect on the direction of FT Cboe i.e., FT Cboe and International Drawdown go up and down completely randomly.

Pair Corralation between FT Cboe and International Drawdown

Considering the 90-day investment horizon FT Cboe is expected to generate 2.84 times less return on investment than International Drawdown. In addition to that, FT Cboe is 1.01 times more volatile than International Drawdown Managed. It trades about 0.05 of its total potential returns per unit of risk. International Drawdown Managed is currently generating about 0.13 per unit of volatility. If you would invest  2,000  in International Drawdown Managed on December 29, 2024 and sell it today you would earn a total of  121.00  from holding International Drawdown Managed or generate 6.05% return on investment over 90 days.

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

FT Cboe Vest  vs.  International Drawdown Managed

FT Cboe Vest

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

International Drawdown

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Drawdown Managed are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, International Drawdown is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FT Cboe and International Drawdown

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

The idea behind FT Cboe Vest and International Drawdown Managed 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.