Correlation Between IShares VII and WisdomTree WTI

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

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

Diversification Opportunities for IShares VII and WisdomTree WTI

0.35

Correlation Coefficient

IShares VII  WisdomTree WTI

Weak diversification

The 3 months correlation between IShares and WisdomTree is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and WisdomTree WTI Crude in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree WTI Crude and IShares VII 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 VII PLC are associated (or correlated) with WisdomTree WTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree WTI Crude has no effect on the direction of IShares VII i.e., IShares VII and WisdomTree WTI go up and down completely randomly.

Pair Corralation between IShares VII and WisdomTree WTI

Assuming the 90 days trading horizon IShares VII is expected to generate 1.6 times less return on investment than WisdomTree WTI. But when comparing it to its historical volatility, iShares VII PLC is 1.66 times less risky than WisdomTree WTI. It trades about 0.09 of its potential returns per unit of risk. WisdomTree WTI Crude is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  845.00  in WisdomTree WTI Crude on September 17, 2024 and sell it today you would earn a total of  84.00  from holding WisdomTree WTI Crude or generate 9.94% return on investment over 90 days.

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

iShares VII PLC  vs.  WisdomTree WTI Crude

iShares VII PLC

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IShares VII may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WisdomTree WTI Crude

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree WTI Crude are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, WisdomTree WTI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares VII and WisdomTree WTI

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

The idea behind iShares VII PLC and WisdomTree WTI Crude 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.