Correlation Between WisdomTree International and SGI Dynamic

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

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

Diversification Opportunities for WisdomTree International and SGI Dynamic

-0.58

Correlation Coefficient

WisdomTree International  SGI Dynamic

Excellent diversification

The 3 months correlation between WisdomTree and SGI is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Effic and SGI Dynamic Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGI Dynamic Tactical and WisdomTree International 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 International Efficient are associated (or correlated) with SGI Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGI Dynamic Tactical has no effect on the direction of WisdomTree International i.e., WisdomTree International and SGI Dynamic go up and down completely randomly.

Pair Corralation between WisdomTree International and SGI Dynamic

Given the investment horizon of 90 days WisdomTree International Efficient is expected to under-perform the SGI Dynamic. In addition to that, WisdomTree International is 1.16 times more volatile than SGI Dynamic Tactical. It trades about -0.08 of its total potential returns per unit of risk. SGI Dynamic Tactical is currently generating about 0.19 per unit of volatility. If you would invest  2,939  in SGI Dynamic Tactical on September 2, 2024 and sell it today you would earn a total of  266.00  from holding SGI Dynamic Tactical or generate 9.05% return on investment over 90 days.

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

WisdomTree International Effic  vs.  SGI Dynamic Tactical

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International Efficient has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, WisdomTree International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

SGI Dynamic Tactical

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SGI Dynamic Tactical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, SGI Dynamic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WisdomTree International and SGI Dynamic

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

The idea behind WisdomTree International Efficient and SGI Dynamic Tactical 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.