Correlation Between WisdomTree Cocoa and WisdomTree Natural
Can any of the company-specific risk be diversified away by investing in both WisdomTree Cocoa and WisdomTree Natural 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 Cocoa and WisdomTree Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Cocoa and WisdomTree Natural Gas, you can compare the effects of market volatilities on WisdomTree Cocoa and WisdomTree Natural 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 Cocoa with a short position of WisdomTree Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Cocoa and WisdomTree Natural.
Diversification Opportunities for WisdomTree Cocoa and WisdomTree Natural
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Cocoa and WisdomTree Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Natural Gas and WisdomTree Cocoa 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 Cocoa are associated (or correlated) with WisdomTree Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Natural Gas has no effect on the direction of WisdomTree Cocoa i.e., WisdomTree Cocoa and WisdomTree Natural go up and down completely randomly.
Pair Corralation between WisdomTree Cocoa and WisdomTree Natural
Assuming the 90 days trading horizon WisdomTree Cocoa is expected to generate 0.3 times more return on investment than WisdomTree Natural. However, WisdomTree Cocoa is 3.35 times less risky than WisdomTree Natural. It trades about 0.33 of its potential returns per unit of risk. WisdomTree Natural Gas is currently generating about 0.08 per unit of risk. 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 Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
WisdomTree Cocoa vs. WisdomTree Natural Gas
Performance |
| Timeline |
| WisdomTree Cocoa |
| WisdomTree Natural Gas |
WisdomTree Cocoa and WisdomTree Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Cocoa and WisdomTree Natural
The main advantage of trading using opposite WisdomTree Cocoa and WisdomTree Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Cocoa position performs unexpectedly, WisdomTree Natural 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 Natural will offset losses from the drop in WisdomTree Natural's long position.| WisdomTree Cocoa vs. Leverage Shares 3x | WisdomTree Cocoa vs. WisdomTree Natural Gas | WisdomTree Cocoa vs. GraniteShares 3x Short | WisdomTree Cocoa vs. Leverage Shares 3x |
| WisdomTree Natural vs. GraniteShares 3x Short | WisdomTree Natural vs. WisdomTree Natural Gas | WisdomTree Natural vs. Leverage Shares 3x | WisdomTree Natural vs. WisdomTree Natural Gas |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |