Correlation Between WisdomTree Managed and Principal

Can any of the company-specific risk be diversified away by investing in both WisdomTree Managed and Principal 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 Principal 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 Principal, you can compare the effects of market volatilities on WisdomTree Managed and Principal 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 Principal. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Managed and Principal.

Diversification Opportunities for WisdomTree Managed and Principal

0.87

Correlation Coefficient

WisdomTree Managed  Principal

Very poor diversification

The 3 months correlation between WisdomTree and Principal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Managed Futures and Principal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal 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 Principal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal has no effect on the direction of WisdomTree Managed i.e., WisdomTree Managed and Principal go up and down completely randomly.

Pair Corralation between WisdomTree Managed and Principal

If you would invest  3,477  in WisdomTree Managed Futures on September 20, 2024 and sell it today you would earn a total of  94.00  from holding WisdomTree Managed Futures or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.59%
Values	Daily Returns

WisdomTree Managed Futures  vs.  Principal

WisdomTree Managed

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Managed Futures are ranked lower than 4 (%) 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Principal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Principal is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WisdomTree Managed and Principal

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

The idea behind WisdomTree Managed Futures and Principal 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.