Correlation Between WisdomTree Short and Federated Premier

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

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

Diversification Opportunities for WisdomTree Short and Federated Premier

0.03

Correlation Coefficient

WisdomTree Short  Federated Premier

Significant diversification

The 3 months correlation between WisdomTree and Federated is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Short Term Corporat and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier and WisdomTree Short 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 Short Term Corporate are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of WisdomTree Short i.e., WisdomTree Short and Federated Premier go up and down completely randomly.

Pair Corralation between WisdomTree Short and Federated Premier

Considering the 90-day investment horizon WisdomTree Short Term Corporate is expected to generate 0.31 times more return on investment than Federated Premier. However, WisdomTree Short Term Corporate is 3.23 times less risky than Federated Premier. It trades about 0.08 of its potential returns per unit of risk. Federated Premier Municipal is currently generating about -0.17 per unit of risk. If you would invest  4,549  in WisdomTree Short Term Corporate on September 13, 2024 and sell it today you would earn a total of  46.00  from holding WisdomTree Short Term Corporate or generate 1.01% return on investment over 90 days.

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

WisdomTree Short Term Corporat  vs.  Federated Premier Municipal

WisdomTree Short Term

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Short Term Corporate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, WisdomTree Short is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Federated Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest inconsistent performance, the Fund's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with WisdomTree Short and Federated Premier

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

The idea behind WisdomTree Short Term Corporate and Federated Premier Municipal 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.