Correlation Between IShares and WisdomTree Trust

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

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

Diversification Opportunities for IShares and WisdomTree Trust

-0.52

Correlation Coefficient

IShares  WisdomTree Trust

Excellent diversification

The 3 months correlation between IShares and WisdomTree is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding IShares and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust and IShares 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 are associated (or correlated) with WisdomTree Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Trust has no effect on the direction of IShares i.e., IShares and WisdomTree Trust go up and down completely randomly.

Pair Corralation between IShares and WisdomTree Trust

If you would invest  1,923  in WisdomTree Trust on September 16, 2024 and sell it today you would earn a total of  374.00  from holding WisdomTree Trust or generate 19.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.54%
Values	Daily Returns

IShares  vs.  WisdomTree Trust

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, IShares is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

WisdomTree Trust

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, WisdomTree Trust demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares and WisdomTree Trust

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

The idea behind IShares and WisdomTree Trust 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.