Correlation Between SP 500 and WisdomTree Cocoa

Can any of the company-specific risk be diversified away by investing in both SP 500 and WisdomTree Cocoa 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 SP 500 and WisdomTree Cocoa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SP 500 VIX and WisdomTree Cocoa, you can compare the effects of market volatilities on SP 500 and WisdomTree Cocoa 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 SP 500 with a short position of WisdomTree Cocoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and WisdomTree Cocoa.

Diversification Opportunities for SP 500 and WisdomTree Cocoa

-0.28

Correlation Coefficient

SP 500  WisdomTree Cocoa

Very good diversification

The 3 months correlation between VILX and WisdomTree is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and WisdomTree Cocoa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Cocoa and SP 500 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 SP 500 VIX are associated (or correlated) with WisdomTree Cocoa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Cocoa has no effect on the direction of SP 500 i.e., SP 500 and WisdomTree Cocoa go up and down completely randomly.

Pair Corralation between SP 500 and WisdomTree Cocoa

Assuming the 90 days trading horizon SP 500 VIX is expected to generate 2.38 times more return on investment than WisdomTree Cocoa. However, SP 500 is 2.38 times more volatile than WisdomTree Cocoa. It trades about 0.02 of its potential returns per unit of risk. WisdomTree Cocoa is currently generating about -0.16 per unit of risk. If you would invest  186,620  in SP 500 VIX on December 23, 2024 and sell it today you would lose (20,514) from holding SP 500 VIX or give up 10.99% of portfolio value over 90 days.

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

SP 500 VIX  vs.  WisdomTree Cocoa

SP 500 VIX

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SP 500 VIX are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SP 500 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

WisdomTree Cocoa

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Cocoa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with SP 500 and WisdomTree Cocoa

The main advantage of trading using opposite SP 500 and WisdomTree Cocoa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, WisdomTree Cocoa 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 Cocoa will offset losses from the drop in WisdomTree Cocoa's long position.

The idea behind SP 500 VIX and WisdomTree Cocoa 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.