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- Correlation_trading abstract "In finance, correlation trading is a strategy in which the investor gets exposure to the average correlation of an index. The key to correlation trading is being able to predict when future realized correlation amongst the stocks of a particular index will be greater or less than the "implied" correlation level derived from derivatives on the index and its single stocks. One observation related to correlation trading is the principle of diversification, which implies that the volatility of a portfolio of securities is less than (or equal to) the average volatility of all the securities in that portfolio (based on Modern portfolio theory). The lower the correlation among the individual securities, the lower the overall volatility of the entire portfolio. This is due to the way in which variances behave when summing correlated random variables.To sell correlation, investors can: Sell a call option on the index and buy a portfolio of call options on the individual constituents of the index. Although typically in practice, the trader would choose straddles instead of calls to minimize delta risk as its often not feasible to perfectly replicate the index with single stock options.; Sell a variance swap on the index and buy the variance swaps on the individual constituents; this particular kind of spread trade is called a variance dispersion trade. Sell a correlation swap.In practice, exchange traded funds (ETF's) are sometimes chosen instead of indices.".
- Correlation_trading wikiPageID "2701185".
- Correlation_trading wikiPageLength "1833".
- Correlation_trading wikiPageOutDegree "13".
- Correlation_trading wikiPageRevisionID "671027720".
- Correlation_trading wikiPageWikiLink Call_option.
- Correlation_trading wikiPageWikiLink Category:Derivatives_(finance).
- Correlation_trading wikiPageWikiLink Category:Stock_market.
- Correlation_trading wikiPageWikiLink Correlation.
- Correlation_trading wikiPageWikiLink Correlation_and_dependence.
- Correlation_trading wikiPageWikiLink Correlation_swap.
- Correlation_trading wikiPageWikiLink Diversification_(finance).
- Correlation_trading wikiPageWikiLink Exchange-traded_fund.
- Correlation_trading wikiPageWikiLink Exchange_traded_funds.
- Correlation_trading wikiPageWikiLink Finance.
- Correlation_trading wikiPageWikiLink Modern_portfolio_theory.
- Correlation_trading wikiPageWikiLink Pairs_trade.
- Correlation_trading wikiPageWikiLink Spread_trade.
- Correlation_trading wikiPageWikiLink Sum_of_normally_distributed_random_variables.
- Correlation_trading wikiPageWikiLink Variance_swap.
- Correlation_trading wikiPageWikiLinkText "Correlation trading".
- Correlation_trading wikiPageWikiLinkText "correlation trading".
- Correlation_trading auto "yes".
- Correlation_trading date "December 2009".
- Correlation_trading hasPhotoCollection Correlation_trading.
- Correlation_trading wikiPageUsesTemplate Template:Econ-stub.
- Correlation_trading wikiPageUsesTemplate Template:Unreferenced_stub.
- Correlation_trading subject Category:Derivatives_(finance).
- Correlation_trading subject Category:Stock_market.
- Correlation_trading hypernym Strategy.
- Correlation_trading type Article.
- Correlation_trading type VideoGame.
- Correlation_trading type Article.
- Correlation_trading type Market.
- Correlation_trading comment "In finance, correlation trading is a strategy in which the investor gets exposure to the average correlation of an index. The key to correlation trading is being able to predict when future realized correlation amongst the stocks of a particular index will be greater or less than the "implied" correlation level derived from derivatives on the index and its single stocks.".
- Correlation_trading label "Correlation trading".
- Correlation_trading sameAs m.07yvkn.
- Correlation_trading sameAs Q5172861.
- Correlation_trading sameAs Q5172861.
- Correlation_trading wasDerivedFrom Correlation_trading?oldid=671027720.
- Correlation_trading isPrimaryTopicOf Correlation_trading.