Correlation Between WisdomTree CBOE and KFA Mount
Can any of the company-specific risk be diversified away by investing in both WisdomTree CBOE and KFA Mount 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 KFA Mount 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 KFA Mount Lucas, you can compare the effects of market volatilities on WisdomTree CBOE and KFA Mount 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 KFA Mount. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree CBOE and KFA Mount.
Diversification Opportunities for WisdomTree CBOE and KFA Mount
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WisdomTree and KFA is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree CBOE SP and KFA Mount Lucas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KFA Mount Lucas 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 KFA Mount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KFA Mount Lucas has no effect on the direction of WisdomTree CBOE i.e., WisdomTree CBOE and KFA Mount go up and down completely randomly.
Pair Corralation between WisdomTree CBOE and KFA Mount
Given the investment horizon of 90 days WisdomTree CBOE SP is expected to generate 1.13 times more return on investment than KFA Mount. However, WisdomTree CBOE is 1.13 times more volatile than KFA Mount Lucas. It trades about 0.05 of its potential returns per unit of risk. KFA Mount Lucas is currently generating about -0.08 per unit of risk. If you would invest 3,330 in WisdomTree CBOE SP on October 21, 2024 and sell it today you would earn a total of 23.00 from holding WisdomTree CBOE SP or generate 0.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree CBOE SP vs. KFA Mount Lucas
Performance |
| Timeline |
| WisdomTree CBOE SP |
| KFA Mount Lucas |
WisdomTree CBOE and KFA Mount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree CBOE and KFA Mount
The main advantage of trading using opposite WisdomTree CBOE and KFA Mount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree CBOE position performs unexpectedly, KFA Mount 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 KFA Mount will offset losses from the drop in KFA Mount'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 |
| KFA Mount vs. iMGP DBi Managed | KFA Mount vs. Simplify Exchange Traded | KFA Mount vs. Simplify Interest Rate | KFA Mount vs. AGFiQ Market Neutral |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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