Correlation Between WisdomTree Silver and Vanguard

Can any of the company-specific risk be diversified away by investing in both WisdomTree Silver and Vanguard 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 Vanguard 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 Vanguard SP 500, you can compare the effects of market volatilities on WisdomTree Silver and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Silver and Vanguard.

Diversification Opportunities for WisdomTree Silver and Vanguard

0.16

Correlation Coefficient

WisdomTree Silver  Vanguard

Average diversification

The 3 months correlation between WisdomTree and Vanguard is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Silver 3x and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of WisdomTree Silver i.e., WisdomTree Silver and Vanguard go up and down completely randomly.

Pair Corralation between WisdomTree Silver and Vanguard

Assuming the 90 days trading horizon WisdomTree Silver 3x is expected to generate 7.26 times more return on investment than Vanguard. However, WisdomTree Silver is 7.26 times more volatile than Vanguard SP 500. It trades about 0.09 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.23 per unit of risk. If you would invest  364,750  in WisdomTree Silver 3x on September 3, 2024 and sell it today you would earn a total of  86,700  from holding WisdomTree Silver 3x or generate 23.77% return on investment over 90 days.

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

WisdomTree Silver 3x  vs.  Vanguard SP 500

WisdomTree Silver

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Silver 3x are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Silver unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vanguard SP 500

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WisdomTree Silver and Vanguard

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

The idea behind WisdomTree Silver 3x and Vanguard SP 500 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.