Correlation Between WisdomTree New and InfraCap Equity

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

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

Diversification Opportunities for WisdomTree New and InfraCap Equity

-0.38

Correlation Coefficient

WisdomTree New  InfraCap Equity

Very good diversification

The 3 months correlation between WisdomTree and InfraCap is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree New Economy and InfraCap Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InfraCap Equity Income and WisdomTree New 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 New Economy are associated (or correlated) with InfraCap Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InfraCap Equity Income has no effect on the direction of WisdomTree New i.e., WisdomTree New and InfraCap Equity go up and down completely randomly.

Pair Corralation between WisdomTree New and InfraCap Equity

Given the investment horizon of 90 days WisdomTree New Economy is expected to under-perform the InfraCap Equity. In addition to that, WisdomTree New Economy is as risky as InfraCap Equity. It trades about -0.04 of its total potential returns per unit of risk. InfraCap Equity Income is currently generating about 0.28 per unit of volatility. If you would invest  2,629  in InfraCap Equity Income on September 5, 2024 and sell it today you would earn a total of  156.00  from holding InfraCap Equity Income or generate 5.93% return on investment over 90 days.

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

WisdomTree New Economy  vs.  InfraCap Equity Income

WisdomTree New Economy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree New Economy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, WisdomTree New is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

InfraCap Equity Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InfraCap Equity Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, InfraCap Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WisdomTree New and InfraCap Equity

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

The idea behind WisdomTree New Economy and InfraCap Equity Income 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.