Correlation Between WisdomTree Trust and OAIE

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

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

Diversification Opportunities for WisdomTree Trust and OAIE

0.05

Correlation Coefficient

WisdomTree Trust  OAIE

Significant diversification

The 3 months correlation between WisdomTree and OAIE is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Trust and OAIE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OAIE and WisdomTree Trust 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 Trust are associated (or correlated) with OAIE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OAIE has no effect on the direction of WisdomTree Trust i.e., WisdomTree Trust and OAIE go up and down completely randomly.

Pair Corralation between WisdomTree Trust and OAIE

If you would invest  8,890  in WisdomTree Trust on September 21, 2024 and sell it today you would earn a total of  1,720  from holding WisdomTree Trust or generate 19.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.37%
Values	Daily Returns

WisdomTree Trust   vs.  OAIE

WisdomTree Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, WisdomTree Trust is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

OAIE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OAIE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, OAIE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree Trust and OAIE

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

The idea behind WisdomTree Trust and OAIE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.