Correlation Between WisdomTree Silver and Invesco Municipal

Can any of the company-specific risk be diversified away by investing in both WisdomTree Silver and Invesco Municipal 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 Silver and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WisdomTree Silver 3x and Invesco Municipal Bond, you can compare the effects of market volatilities on WisdomTree Silver and Invesco Municipal 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 Silver with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Silver and Invesco Municipal.

Diversification Opportunities for WisdomTree Silver and Invesco Municipal

-0.51

Correlation Coefficient

WisdomTree Silver  Invesco Municipal

Excellent diversification

The 3 months correlation between WisdomTree and Invesco is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Silver 3x and Invesco Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Bond and WisdomTree Silver 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 Silver 3x are associated (or correlated) with Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal Bond has no effect on the direction of WisdomTree Silver i.e., WisdomTree Silver and Invesco Municipal go up and down completely randomly.

Pair Corralation between WisdomTree Silver and Invesco Municipal

Assuming the 90 days trading horizon WisdomTree Silver 3x is expected to generate 10.01 times more return on investment than Invesco Municipal. However, WisdomTree Silver is 10.01 times more volatile than Invesco Municipal Bond. It trades about 0.01 of its potential returns per unit of risk. Invesco Municipal Bond is currently generating about 0.01 per unit of risk. If you would invest  474,100  in WisdomTree Silver 3x on September 14, 2024 and sell it today you would lose (34,600) from holding WisdomTree Silver 3x or give up 7.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

WisdomTree Silver 3x  vs.  Invesco Municipal Bond

WisdomTree Silver

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days WisdomTree Silver 3x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WisdomTree Silver is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Municipal Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Municipal Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Invesco Municipal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WisdomTree Silver and Invesco Municipal

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

The idea behind WisdomTree Silver 3x and Invesco Municipal Bond 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..