Correlation Between IShares Core and WisdomTree Yield

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

By analyzing existing cross correlation between iShares Core Aggregate and WisdomTree Yield Enhanced, you can compare the effects of market volatilities on IShares Core and WisdomTree Yield 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 IShares Core with a short position of WisdomTree Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and WisdomTree Yield.

Diversification Opportunities for IShares Core and WisdomTree Yield

1.0

Correlation Coefficient

IShares Core  WisdomTree Yield

No risk reduction

The 3 months correlation between IShares and WisdomTree is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Aggregate and WisdomTree Yield Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Yield Enhanced and IShares Core 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 iShares Core Aggregate are associated (or correlated) with WisdomTree Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Yield Enhanced has no effect on the direction of IShares Core i.e., IShares Core and WisdomTree Yield go up and down completely randomly.

Pair Corralation between IShares Core and WisdomTree Yield

Considering the 90-day investment horizon iShares Core Aggregate is expected to under-perform the WisdomTree Yield. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core Aggregate is 1.05 times less risky than WisdomTree Yield. The etf trades about -0.01 of its potential returns per unit of risk. The WisdomTree Yield Enhanced is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,377  in WisdomTree Yield Enhanced on August 30, 2024 and sell it today you would lose (3.00) from holding WisdomTree Yield Enhanced or give up 0.07% of portfolio value over 90 days.

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

iShares Core Aggregate  vs.  WisdomTree Yield Enhanced

iShares Core Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WisdomTree Yield Enhanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Yield Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, WisdomTree Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and WisdomTree Yield

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

The idea behind iShares Core Aggregate and WisdomTree Yield Enhanced 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.