Correlation Between IShares Core and WisdomTree Issuer

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

By analyzing existing cross correlation between iShares Core SP and WisdomTree Issuer ICAV, you can compare the effects of market volatilities on IShares Core and WisdomTree Issuer 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 Issuer. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and WisdomTree Issuer.

Diversification Opportunities for IShares Core and WisdomTree Issuer

0.75

Correlation Coefficient

IShares Core  WisdomTree Issuer

Poor diversification

The 3 months correlation between IShares and WisdomTree is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and WisdomTree Issuer ICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Issuer ICAV 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 SP are associated (or correlated) with WisdomTree Issuer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Issuer ICAV has no effect on the direction of IShares Core i.e., IShares Core and WisdomTree Issuer go up and down completely randomly.

Pair Corralation between IShares Core and WisdomTree Issuer

Assuming the 90 days trading horizon IShares Core is expected to generate 1.2 times less return on investment than WisdomTree Issuer. But when comparing it to its historical volatility, iShares Core SP is 1.55 times less risky than WisdomTree Issuer. It trades about 0.12 of its potential returns per unit of risk. WisdomTree Issuer ICAV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,927  in WisdomTree Issuer ICAV on September 26, 2024 and sell it today you would earn a total of  1,442  from holding WisdomTree Issuer ICAV or generate 74.83% return on investment over 90 days.

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

iShares Core SP  vs.  WisdomTree Issuer ICAV

iShares Core SP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WisdomTree Issuer ICAV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Issuer ICAV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, WisdomTree Issuer is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Core and WisdomTree Issuer

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

The idea behind iShares Core SP and WisdomTree Issuer ICAV 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.