Correlation Between FT Cboe and Energy Select

Can any of the company-specific risk be diversified away by investing in both FT Cboe and Energy Select 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 Energy Select 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 Energy Select Sector, you can compare the effects of market volatilities on FT Cboe and Energy Select 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 Energy Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and Energy Select.

Diversification Opportunities for FT Cboe and Energy Select

0.8

Correlation Coefficient

FT Cboe  Energy Select

Very poor diversification

The 3 months correlation between BUFD and Energy is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector 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 Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of FT Cboe i.e., FT Cboe and Energy Select go up and down completely randomly.

Pair Corralation between FT Cboe and Energy Select

Given the investment horizon of 90 days FT Cboe is expected to generate 1.1 times less return on investment than Energy Select. But when comparing it to its historical volatility, FT Cboe Vest is 2.76 times less risky than Energy Select. It trades about 0.28 of its potential returns per unit of risk. Energy Select Sector is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,132  in Energy Select Sector on May 2, 2025 and sell it today you would earn a total of  636.00  from holding Energy Select Sector or generate 7.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

FT Cboe Vest  vs.  Energy Select Sector

FT Cboe Vest

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, FT Cboe may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Energy Select Sector

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Select Sector are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Energy Select may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with FT Cboe and Energy Select

The main advantage of trading using opposite FT Cboe and Energy Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe position performs unexpectedly, Energy Select 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 Energy Select will offset losses from the drop in Energy Select's long position.

The idea behind FT Cboe Vest and Energy Select Sector 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.