Correlation Between IShares Core and WisdomTree High

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

By analyzing existing cross correlation between iShares Core 1 5 and WisdomTree High Yield, you can compare the effects of market volatilities on IShares Core and WisdomTree 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 IShares Core with a short position of WisdomTree High. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and WisdomTree High.

Diversification Opportunities for IShares Core and WisdomTree High

0.98

Correlation Coefficient

IShares Core  WisdomTree High

Almost no diversification

The 3 months correlation between IShares and WisdomTree is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core 1 5 and WisdomTree High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree High Yield 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 1 5 are associated (or correlated) with WisdomTree High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree High Yield has no effect on the direction of IShares Core i.e., IShares Core and WisdomTree High go up and down completely randomly.

Pair Corralation between IShares Core and WisdomTree High

Given the investment horizon of 90 days IShares Core is expected to generate 1.39 times less return on investment than WisdomTree High. In addition to that, IShares Core is 1.08 times more volatile than WisdomTree High Yield. It trades about 0.05 of its total potential returns per unit of risk. WisdomTree High Yield is currently generating about 0.07 per unit of volatility. If you would invest  4,808  in WisdomTree High Yield on September 2, 2024 and sell it today you would earn a total of  28.00  from holding WisdomTree High Yield or generate 0.58% return on investment over 90 days.

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

iShares Core 1 5  vs.  WisdomTree High Yield

iShares Core 1

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core 1 5 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree High Yield

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree High Yield are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, WisdomTree High is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Core and WisdomTree High

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

The idea behind iShares Core 1 5 and WisdomTree 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..