Correlation Between WisdomTree and WisdomTree Precious

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

By analyzing existing cross correlation between WisdomTree SP 500 and WisdomTree Precious Metals, you can compare the effects of market volatilities on WisdomTree and WisdomTree Precious 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 with a short position of WisdomTree Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and WisdomTree Precious.

Diversification Opportunities for WisdomTree and WisdomTree Precious

-0.55

Correlation Coefficient

WisdomTree  WisdomTree Precious

Excellent diversification

The 3 months correlation between WisdomTree and WisdomTree is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and WisdomTree Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Precious and WisdomTree 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 SP 500 are associated (or correlated) with WisdomTree Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Precious has no effect on the direction of WisdomTree i.e., WisdomTree and WisdomTree Precious go up and down completely randomly.

Pair Corralation between WisdomTree and WisdomTree Precious

Assuming the 90 days trading horizon WisdomTree SP 500 is expected to under-perform the WisdomTree Precious. In addition to that, WisdomTree is 2.2 times more volatile than WisdomTree Precious Metals. It trades about -0.12 of its total potential returns per unit of risk. WisdomTree Precious Metals is currently generating about 0.12 per unit of volatility. If you would invest  2,687  in WisdomTree Precious Metals on September 3, 2024 and sell it today you would earn a total of  212.00  from holding WisdomTree Precious Metals or generate 7.89% return on investment over 90 days.

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

WisdomTree SP 500  vs.  WisdomTree Precious Metals

WisdomTree SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

WisdomTree Precious

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Precious Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Precious may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WisdomTree and WisdomTree Precious

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

The idea behind WisdomTree SP 500 and WisdomTree Precious Metals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.