Correlation Between FT Cboe and SHP ETF
Can any of the company-specific risk be diversified away by investing in both FT Cboe and SHP ETF 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 FT Cboe and SHP ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT Cboe Vest and SHP ETF Trust, you can compare the effects of market volatilities on FT Cboe and SHP ETF 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 FT Cboe with a short position of SHP ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and SHP ETF.
Diversification Opportunities for FT Cboe and SHP ETF
Poor diversification
The 3 months correlation between KNG and SHP is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and SHP ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHP ETF Trust and FT Cboe 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 FT Cboe Vest are associated (or correlated) with SHP ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHP ETF Trust has no effect on the direction of FT Cboe i.e., FT Cboe and SHP ETF go up and down completely randomly.
Pair Corralation between FT Cboe and SHP ETF
Considering the 90-day investment horizon FT Cboe is expected to generate 2.01 times less return on investment than SHP ETF. In addition to that, FT Cboe is 1.09 times more volatile than SHP ETF Trust. It trades about 0.05 of its total potential returns per unit of risk. SHP ETF Trust is currently generating about 0.11 per unit of volatility. If you would invest 3,759 in SHP ETF Trust on August 26, 2024 and sell it today you would earn a total of 1,437 from holding SHP ETF Trust or generate 38.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FT Cboe Vest vs. SHP ETF Trust
Performance |
| Timeline |
| FT Cboe Vest |
| SHP ETF Trust |
FT Cboe and SHP ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FT Cboe and SHP ETF
The main advantage of trading using opposite FT Cboe and SHP ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe position performs unexpectedly, SHP ETF 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 SHP ETF will offset losses from the drop in SHP ETF's long position.The idea behind FT Cboe Vest and SHP ETF Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SHP ETF vs. iShares Trust | SHP ETF vs. Simplify Volatility Premium | SHP ETF vs. Tidal Trust II | SHP ETF vs. SHP ETF Trust |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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