Correlation Between Global X and WisdomTree CBOE

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

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

Diversification Opportunities for Global X and WisdomTree CBOE

0.89

Correlation Coefficient

Global X  WisdomTree CBOE

Very poor diversification

The 3 months correlation between Global and WisdomTree is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Global X NASDAQ and WisdomTree CBOE SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree CBOE SP and Global X 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 Global X NASDAQ are associated (or correlated) with WisdomTree CBOE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree CBOE SP has no effect on the direction of Global X i.e., Global X and WisdomTree CBOE go up and down completely randomly.

Pair Corralation between Global X and WisdomTree CBOE

Given the investment horizon of 90 days Global X NASDAQ is expected to generate 0.53 times more return on investment than WisdomTree CBOE. However, Global X NASDAQ is 1.89 times less risky than WisdomTree CBOE. It trades about 0.35 of its potential returns per unit of risk. WisdomTree CBOE SP is currently generating about -0.07 per unit of risk. If you would invest  1,807  in Global X NASDAQ on September 22, 2024 and sell it today you would earn a total of  48.00  from holding Global X NASDAQ or generate 2.66% return on investment over 90 days.

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

Global X NASDAQ  vs.  WisdomTree CBOE SP

Global X NASDAQ

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X NASDAQ are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree CBOE SP

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree CBOE SP are ranked lower than 6 (%) 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.

Pair Trading with Global X and WisdomTree CBOE

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

The idea behind Global X NASDAQ and WisdomTree CBOE SP 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.