Correlation Between WisdomTree Physical and WisdomTree

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

By analyzing existing cross correlation between WisdomTree Physical Silver and WisdomTree SP 500, you can compare the effects of market volatilities on WisdomTree Physical 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 WisdomTree Physical with a short position of WisdomTree. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Physical and WisdomTree.

Diversification Opportunities for WisdomTree Physical and WisdomTree

0.11

Correlation Coefficient

WisdomTree Physical  WisdomTree

Average diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Physical Silver and WisdomTree SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SP 500 and WisdomTree Physical 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 Physical Silver 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 SP 500 has no effect on the direction of WisdomTree Physical i.e., WisdomTree Physical and WisdomTree go up and down completely randomly.

Pair Corralation between WisdomTree Physical and WisdomTree

Assuming the 90 days trading horizon WisdomTree Physical is expected to generate 8.88 times less return on investment than WisdomTree. But when comparing it to its historical volatility, WisdomTree Physical Silver is 1.36 times less risky than WisdomTree. It trades about 0.02 of its potential returns per unit of risk. WisdomTree SP 500 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,632  in WisdomTree SP 500 on September 28, 2024 and sell it today you would earn a total of  1,570  from holding WisdomTree SP 500 or generate 16.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

WisdomTree Physical Silver  vs.  WisdomTree SP 500

WisdomTree Physical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Physical Silver are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, WisdomTree Physical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WisdomTree SP 500

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SP 500 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, WisdomTree reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Physical and WisdomTree

The main advantage of trading using opposite WisdomTree Physical and WisdomTree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Physical 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 WisdomTree Physical Silver and WisdomTree SP 500 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.