Correlation Between Main Buywrite and WisdomTree CBOE
Can any of the company-specific risk be diversified away by investing in both Main Buywrite 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 Main Buywrite and WisdomTree CBOE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Main Buywrite ETF and WisdomTree CBOE SP, you can compare the effects of market volatilities on Main Buywrite 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 Main Buywrite with a short position of WisdomTree CBOE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Buywrite and WisdomTree CBOE.
Diversification Opportunities for Main Buywrite and WisdomTree CBOE
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Main and WisdomTree is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Main Buywrite ETF 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 Main Buywrite 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 Main Buywrite ETF 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 Main Buywrite i.e., Main Buywrite and WisdomTree CBOE go up and down completely randomly.
Pair Corralation between Main Buywrite and WisdomTree CBOE
Given the investment horizon of 90 days Main Buywrite is expected to generate 1.49 times less return on investment than WisdomTree CBOE. But when comparing it to its historical volatility, Main Buywrite ETF is 1.59 times less risky than WisdomTree CBOE. It trades about 0.11 of its potential returns per unit of risk. WisdomTree CBOE SP is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,515 in WisdomTree CBOE SP on August 24, 2024 and sell it today you would earn a total of 880.00 from holding WisdomTree CBOE SP or generate 34.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Main Buywrite ETF vs. WisdomTree CBOE SP
Performance |
| Timeline |
| Main Buywrite ETF |
| WisdomTree CBOE SP |
Main Buywrite and WisdomTree CBOE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Buywrite and WisdomTree CBOE
The main advantage of trading using opposite Main Buywrite and WisdomTree CBOE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Buywrite 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.| Main Buywrite vs. Global X SP | Main Buywrite vs. Global X Nasdaq | Main Buywrite vs. First Trust BuyWrite | Main Buywrite vs. Amplify CWP Enhanced |
| WisdomTree CBOE vs. Global X SP | WisdomTree CBOE vs. Global X Nasdaq | WisdomTree CBOE vs. First Trust BuyWrite | WisdomTree CBOE vs. Amplify CWP Enhanced |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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