Correlation Between WisdomTree Natural and WisdomTree Cocoa
Can any of the company-specific risk be diversified away by investing in both WisdomTree Natural 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 WisdomTree Natural and WisdomTree Cocoa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Natural Gas and WisdomTree Cocoa, you can compare the effects of market volatilities on WisdomTree Natural 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 WisdomTree Natural with a short position of WisdomTree Cocoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Natural and WisdomTree Cocoa.
Diversification Opportunities for WisdomTree Natural and WisdomTree Cocoa
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WisdomTree and WisdomTree is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and WisdomTree Cocoa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Cocoa and WisdomTree Natural 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 Natural Gas 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 WisdomTree Natural i.e., WisdomTree Natural and WisdomTree Cocoa go up and down completely randomly.
Pair Corralation between WisdomTree Natural and WisdomTree Cocoa
Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to under-perform the WisdomTree Cocoa. In addition to that, WisdomTree Natural is 3.53 times more volatile than WisdomTree Cocoa. It trades about -0.04 of its total potential returns per unit of risk. WisdomTree Cocoa is currently generating about 0.33 per unit of volatility. If you would invest 1,105 in WisdomTree Cocoa on August 31, 2024 and sell it today you would earn a total of 307.00 from holding WisdomTree Cocoa or generate 27.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
WisdomTree Natural Gas vs. WisdomTree Cocoa
Performance |
| Timeline |
| WisdomTree Natural Gas |
| WisdomTree Cocoa |
WisdomTree Natural and WisdomTree Cocoa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Natural and WisdomTree Cocoa
The main advantage of trading using opposite WisdomTree Natural and WisdomTree Cocoa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Natural 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.| WisdomTree Natural vs. GraniteShares 3x Short | WisdomTree Natural vs. WisdomTree Natural Gas | WisdomTree Natural vs. Leverage Shares 3x | WisdomTree Natural vs. WisdomTree SP 500 |
| WisdomTree Cocoa vs. Leverage Shares 3x | WisdomTree Cocoa vs. WisdomTree Natural Gas | WisdomTree Cocoa vs. GraniteShares 3x Short | WisdomTree Cocoa vs. Leverage Shares 3x |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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