Correlation Between First Trust and WisdomTree Cocoa
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and WisdomTree Cocoa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Value and WisdomTree Cocoa, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of WisdomTree Cocoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WisdomTree Cocoa.
Diversification Opportunities for First Trust and WisdomTree Cocoa
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and WisdomTree is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and WisdomTree Cocoa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Cocoa and First Trust 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 First Trust Value 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 First Trust i.e., First Trust and WisdomTree Cocoa go up and down completely randomly.
Pair Corralation between First Trust and WisdomTree Cocoa
Assuming the 90 days trading horizon First Trust is expected to generate 6.71 times less return on investment than WisdomTree Cocoa. But when comparing it to its historical volatility, First Trust Value is 4.9 times less risky than WisdomTree Cocoa. It trades about 0.27 of its potential returns per unit of risk. WisdomTree Cocoa is currently generating about 0.37 of returns per unit of risk over similar time horizon. 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Value vs. WisdomTree Cocoa
Performance |
| Timeline |
| First Trust Value |
| WisdomTree Cocoa |
First Trust and WisdomTree Cocoa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and WisdomTree Cocoa
The main advantage of trading using opposite First Trust and WisdomTree Cocoa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. WisdomTree Natural Gas | First Trust vs. WisdomTree Natural Gas | First Trust vs. Leverage Shares 2x | First Trust vs. WisdomTree Silver 3x |
| WisdomTree Cocoa vs. Leverage Shares 3x | WisdomTree Cocoa vs. WisdomTree Natural Gas | WisdomTree Cocoa vs. GraniteShares 3x Short | WisdomTree Cocoa 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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