Correlation Between Global X and WisdomTree Cocoa
Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and WisdomTree Cocoa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Clean and WisdomTree Cocoa, you can compare the effects of market volatilities on Global X 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 Global X with a short position of WisdomTree Cocoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and WisdomTree Cocoa.
Diversification Opportunities for Global X and WisdomTree Cocoa
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and WisdomTree is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Global X Clean and WisdomTree Cocoa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Cocoa 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 Clean 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 Global X i.e., Global X and WisdomTree Cocoa go up and down completely randomly.
Pair Corralation between Global X and WisdomTree Cocoa
Assuming the 90 days trading horizon Global X is expected to generate 6.74 times less return on investment than WisdomTree Cocoa. But when comparing it to its historical volatility, Global X Clean is 3.37 times less risky than WisdomTree Cocoa. It trades about 0.07 of its potential returns per unit of risk. WisdomTree Cocoa is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 251.00 in WisdomTree Cocoa on September 14, 2024 and sell it today you would earn a total of 1,416 from holding WisdomTree Cocoa or generate 564.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Clean vs. WisdomTree Cocoa
Performance |
| Timeline |
| Global X Clean |
| WisdomTree Cocoa |
Global X and WisdomTree Cocoa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and WisdomTree Cocoa
The main advantage of trading using opposite Global X and WisdomTree Cocoa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.| Global X vs. Global X Data | Global X vs. Global X Copper | Global X vs. Global X ETFs | Global X vs. Global X Infrastructure |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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