Correlation Between WisdomTree CBOE and FT Cboe

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

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

Diversification Opportunities for WisdomTree CBOE and FT Cboe

0.96

Correlation Coefficient

WisdomTree CBOE  FT Cboe

Almost no diversification

The 3 months correlation between WisdomTree and BUFQ is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree CBOE SP and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest and WisdomTree 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 WisdomTree CBOE SP are associated (or correlated) with FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of WisdomTree CBOE i.e., WisdomTree CBOE and FT Cboe go up and down completely randomly.

Pair Corralation between WisdomTree CBOE and FT Cboe

Given the investment horizon of 90 days WisdomTree CBOE SP is expected to under-perform the FT Cboe. In addition to that, WisdomTree CBOE is 1.73 times more volatile than FT Cboe Vest. It trades about -0.04 of its total potential returns per unit of risk. FT Cboe Vest is currently generating about 0.09 per unit of volatility. If you would invest  3,149  in FT Cboe Vest on October 1, 2024 and sell it today you would earn a total of  29.00  from holding FT Cboe Vest or generate 0.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

WisdomTree CBOE SP  vs.  FT Cboe Vest

WisdomTree CBOE SP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree CBOE SP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, WisdomTree CBOE is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FT Cboe Vest

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with WisdomTree CBOE and FT Cboe

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

The idea behind WisdomTree CBOE SP and FT Cboe Vest 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.