Correlation Between WisdomTree Managed and PAK

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

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

Diversification Opportunities for WisdomTree Managed and PAK

0.66

Correlation Coefficient

WisdomTree Managed  PAK

Poor diversification

The 3 months correlation between WisdomTree and PAK is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Managed Futures and PAK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAK and WisdomTree Managed 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 Managed Futures are associated (or correlated) with PAK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAK has no effect on the direction of WisdomTree Managed i.e., WisdomTree Managed and PAK go up and down completely randomly.

Pair Corralation between WisdomTree Managed and PAK

If you would invest  3,426  in WisdomTree Managed Futures on September 5, 2024 and sell it today you would earn a total of  183.00  from holding WisdomTree Managed Futures or generate 5.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.18%
Values	Daily Returns

WisdomTree Managed Futures  vs.  PAK

WisdomTree Managed

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Managed Futures are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, WisdomTree Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PAK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PAK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, PAK is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with WisdomTree Managed and PAK

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

The idea behind WisdomTree Managed Futures and PAK 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.