Correlation Between IShares 20 and WisdomTree

Can any of the company-specific risk be diversified away by investing in both IShares 20 and WisdomTree 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 20 and WisdomTree into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 20 Year and WisdomTree 7 10 Year, you can compare the effects of market volatilities on IShares 20 and WisdomTree 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 20 with a short position of WisdomTree. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 20 and WisdomTree.

Diversification Opportunities for IShares 20 and WisdomTree

0.93

Correlation Coefficient

IShares 20  WisdomTree

Almost no diversification

The 3 months correlation between IShares and WisdomTree is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares 20 Year and WisdomTree 7 10 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree 7 10 and IShares 20 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 20 Year are associated (or correlated) with WisdomTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree 7 10 has no effect on the direction of IShares 20 i.e., IShares 20 and WisdomTree go up and down completely randomly.

Pair Corralation between IShares 20 and WisdomTree

Considering the 90-day investment horizon iShares 20 Year is expected to under-perform the WisdomTree. In addition to that, IShares 20 is 2.29 times more volatile than WisdomTree 7 10 Year. It trades about -0.04 of its total potential returns per unit of risk. WisdomTree 7 10 Year is currently generating about -0.06 per unit of volatility. If you would invest  5,059  in WisdomTree 7 10 Year on August 30, 2024 and sell it today you would lose (77.00) from holding WisdomTree 7 10 Year or give up 1.52% of portfolio value over 90 days.

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

iShares 20 Year  vs.  WisdomTree 7 10 Year

iShares 20 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 20 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, IShares 20 is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree 7 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree 7 10 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, WisdomTree is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares 20 and WisdomTree

The main advantage of trading using opposite IShares 20 and WisdomTree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 20 position performs unexpectedly, WisdomTree 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 will offset losses from the drop in WisdomTree's long position.

The idea behind iShares 20 Year and WisdomTree 7 10 Year 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.