Correlation Between WisdomTree Continuous and First Trust

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

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

Diversification Opportunities for WisdomTree Continuous and First Trust

0.07

Correlation Coefficient

WisdomTree Continuous  First Trust

Significant diversification

The 3 months correlation between WisdomTree and First is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Continuous Commodit and First Trust Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Alternative and WisdomTree Continuous 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 Continuous Commodity are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Alternative has no effect on the direction of WisdomTree Continuous i.e., WisdomTree Continuous and First Trust go up and down completely randomly.

Pair Corralation between WisdomTree Continuous and First Trust

Considering the 90-day investment horizon WisdomTree Continuous Commodity is expected to generate 1.53 times more return on investment than First Trust. However, WisdomTree Continuous is 1.53 times more volatile than First Trust Alternative. It trades about 0.15 of its potential returns per unit of risk. First Trust Alternative is currently generating about 0.05 per unit of risk. If you would invest  1,788  in WisdomTree Continuous Commodity on September 12, 2024 and sell it today you would earn a total of  134.00  from holding WisdomTree Continuous Commodity or generate 7.49% return on investment over 90 days.

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

WisdomTree Continuous Commodit  vs.  First Trust Alternative

WisdomTree Continuous

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Continuous Commodity are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, WisdomTree Continuous may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Trust Alternative

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Alternative are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Trust is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with WisdomTree Continuous and First Trust

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

The idea behind WisdomTree Continuous Commodity and First Trust Alternative 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 CEOs Directory module to screen CEOs from public companies around the world.