Correlation Between WisdomTree Cocoa and WisdomTree Grains
Can any of the company-specific risk be diversified away by investing in both WisdomTree Cocoa and WisdomTree Grains 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 Grains 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 Grains, you can compare the effects of market volatilities on WisdomTree Cocoa and WisdomTree Grains 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 Grains. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Cocoa and WisdomTree Grains.
Diversification Opportunities for WisdomTree Cocoa and WisdomTree Grains
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WisdomTree and WisdomTree is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Cocoa and WisdomTree Grains in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Grains 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 Grains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Grains has no effect on the direction of WisdomTree Cocoa i.e., WisdomTree Cocoa and WisdomTree Grains go up and down completely randomly.
Pair Corralation between WisdomTree Cocoa and WisdomTree Grains
Assuming the 90 days trading horizon WisdomTree Cocoa is expected to generate 4.86 times more return on investment than WisdomTree Grains. However, WisdomTree Cocoa is 4.86 times more volatile than WisdomTree Grains. It trades about 0.37 of its potential returns per unit of risk. WisdomTree Grains is currently generating about -0.05 per unit of risk. If you would invest 1,105 in WisdomTree Cocoa on September 2, 2024 and sell it today you would earn a total of 341.00 from holding WisdomTree Cocoa or generate 30.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Cocoa vs. WisdomTree Grains
Performance |
| Timeline |
| WisdomTree Cocoa |
| WisdomTree Grains |
WisdomTree Cocoa and WisdomTree Grains Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Cocoa and WisdomTree Grains
The main advantage of trading using opposite WisdomTree Cocoa and WisdomTree Grains positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Cocoa position performs unexpectedly, WisdomTree Grains 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 Grains will offset losses from the drop in WisdomTree Grains' 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 Grains vs. Leverage Shares 3x | WisdomTree Grains vs. WisdomTree Natural Gas | WisdomTree Grains vs. GraniteShares 3x Short | WisdomTree Grains 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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