Correlation Between WisdomTree CBOE and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree CBOE and First Trust 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 CBOE and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree CBOE SP and First Trust Enhanced, you can compare the effects of market volatilities on WisdomTree CBOE and First Trust 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 CBOE with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree CBOE and First Trust.
Diversification Opportunities for WisdomTree CBOE and First Trust
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree CBOE SP and First Trust Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Enhanced and WisdomTree 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 WisdomTree CBOE SP are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Enhanced has no effect on the direction of WisdomTree CBOE i.e., WisdomTree CBOE and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree CBOE and First Trust
Given the investment horizon of 90 days WisdomTree CBOE is expected to generate 1.05 times less return on investment than First Trust. But when comparing it to its historical volatility, WisdomTree CBOE SP is 1.2 times less risky than First Trust. It trades about 0.37 of its potential returns per unit of risk. First Trust Enhanced is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,000 in First Trust Enhanced on September 1, 2024 and sell it today you would earn a total of 84.00 from holding First Trust Enhanced or generate 4.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree CBOE SP vs. First Trust Enhanced
Performance |
| Timeline |
| WisdomTree CBOE SP |
| First Trust Enhanced |
WisdomTree CBOE and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree CBOE and First Trust
The main advantage of trading using opposite WisdomTree CBOE and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree CBOE position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| WisdomTree CBOE vs. Invesco SP 500 | WisdomTree CBOE vs. WisdomTree Managed Futures | WisdomTree CBOE vs. SPDR MSCI Emerging | WisdomTree CBOE vs. WisdomTree Dynamic Currency |
| First Trust vs. Rivernorth Opportunistic Municipalome | First Trust vs. Blackrock Muni Intermediate | First Trust vs. Blackrock Muniholdings Ny | First Trust vs. Nuveen New York |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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