Correlation Between WisdomTree and WisdomTree Cocoa
Can any of the company-specific risk be diversified away by investing in both WisdomTree 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 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 SP 500 and WisdomTree Cocoa, you can compare the effects of market volatilities on WisdomTree 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 with a short position of WisdomTree Cocoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and WisdomTree Cocoa.
Diversification Opportunities for WisdomTree and WisdomTree Cocoa
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and WisdomTree Cocoa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Cocoa and WisdomTree 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 SP 500 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 i.e., WisdomTree and WisdomTree Cocoa go up and down completely randomly.
Pair Corralation between WisdomTree and WisdomTree Cocoa
Assuming the 90 days trading horizon WisdomTree is expected to generate 3.39 times less return on investment than WisdomTree Cocoa. But when comparing it to its historical volatility, WisdomTree SP 500 is 1.36 times less risky than WisdomTree Cocoa. It trades about 0.14 of its potential returns per unit of risk. WisdomTree Cocoa is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 1,094 in WisdomTree Cocoa on August 30, 2024 and sell it today you would earn a total of 318.00 from holding WisdomTree Cocoa or generate 29.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree SP 500 vs. WisdomTree Cocoa
Performance |
| Timeline |
| WisdomTree SP 500 |
| WisdomTree Cocoa |
WisdomTree and WisdomTree Cocoa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree and WisdomTree Cocoa
The main advantage of trading using opposite WisdomTree and WisdomTree Cocoa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree 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 vs. GraniteShares 3x Short | WisdomTree vs. WisdomTree Natural Gas | WisdomTree vs. Leverage Shares 3x | WisdomTree vs. WisdomTree Natural Gas |
| WisdomTree Cocoa vs. WisdomTree Natural Gas | WisdomTree Cocoa vs. WisdomTree NASDAQ 100 | WisdomTree Cocoa vs. WisdomTree Silver 3x | WisdomTree Cocoa vs. WisdomTree SP 500 |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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