Correlation Between WisdomTree Managed and Vanguard Intermediate

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

Diversification Opportunities for WisdomTree Managed and Vanguard Intermediate

-0.55

Correlation Coefficient

WisdomTree Managed  Vanguard Intermediate

Excellent diversification

The 3 months correlation between WisdomTree and Vanguard is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Managed Futures and Vanguard Intermediate Term Tre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate 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 Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of WisdomTree Managed i.e., WisdomTree Managed and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between WisdomTree Managed and Vanguard Intermediate

Given the investment horizon of 90 days WisdomTree Managed Futures is expected to generate 3.36 times more return on investment than Vanguard Intermediate. However, WisdomTree Managed is 3.36 times more volatile than Vanguard Intermediate Term Treasury. It trades about 0.08 of its potential returns per unit of risk. Vanguard Intermediate Term Treasury is currently generating about -0.06 per unit of risk. If you would invest  3,462  in WisdomTree Managed Futures on September 2, 2024 and sell it today you would earn a total of  142.00  from holding WisdomTree Managed Futures or generate 4.1% return on investment over 90 days.

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

WisdomTree Managed Futures  vs.  Vanguard Intermediate Term Tre

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.

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Intermediate Term Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Vanguard Intermediate is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WisdomTree Managed and Vanguard Intermediate

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

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