Correlation Between WisdomTree MidCap and Invesco High

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

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

Diversification Opportunities for WisdomTree MidCap and Invesco High

0.94

Correlation Coefficient

WisdomTree MidCap  Invesco High

Almost no diversification

The 3 months correlation between WisdomTree and Invesco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree MidCap Dividend and Invesco High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco High Yield and WisdomTree MidCap 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 MidCap Dividend are associated (or correlated) with Invesco High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco High Yield has no effect on the direction of WisdomTree MidCap i.e., WisdomTree MidCap and Invesco High go up and down completely randomly.

Pair Corralation between WisdomTree MidCap and Invesco High

Considering the 90-day investment horizon WisdomTree MidCap Dividend is expected to generate 1.06 times more return on investment than Invesco High. However, WisdomTree MidCap is 1.06 times more volatile than Invesco High Yield. It trades about 0.17 of its potential returns per unit of risk. Invesco High Yield is currently generating about 0.12 per unit of risk. If you would invest  5,002  in WisdomTree MidCap Dividend on August 30, 2024 and sell it today you would earn a total of  523.00  from holding WisdomTree MidCap Dividend or generate 10.46% return on investment over 90 days.

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

WisdomTree MidCap Dividend  vs.  Invesco High Yield

WisdomTree MidCap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree MidCap Dividend are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, WisdomTree MidCap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Invesco High Yield

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco High Yield are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Invesco High may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with WisdomTree MidCap and Invesco High

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

The idea behind WisdomTree MidCap Dividend and Invesco High Yield 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.