Correlation Between WisdomTree Brent and WisdomTree Treasuries
Can any of the company-specific risk be diversified away by investing in both WisdomTree Brent and WisdomTree Treasuries 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 Brent and WisdomTree Treasuries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Brent Crude and WisdomTree Treasuries 10Y, you can compare the effects of market volatilities on WisdomTree Brent and WisdomTree Treasuries 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 Brent with a short position of WisdomTree Treasuries. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Brent and WisdomTree Treasuries.
Diversification Opportunities for WisdomTree Brent and WisdomTree Treasuries
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between WisdomTree and WisdomTree is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Brent Crude and WisdomTree Treasuries 10Y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Treasuries 10Y and WisdomTree Brent 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 Brent Crude are associated (or correlated) with WisdomTree Treasuries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Treasuries 10Y has no effect on the direction of WisdomTree Brent i.e., WisdomTree Brent and WisdomTree Treasuries go up and down completely randomly.
Pair Corralation between WisdomTree Brent and WisdomTree Treasuries
Assuming the 90 days trading horizon WisdomTree Brent Crude is expected to under-perform the WisdomTree Treasuries. In addition to that, WisdomTree Brent is 4.9 times more volatile than WisdomTree Treasuries 10Y. It trades about -0.03 of its total potential returns per unit of risk. WisdomTree Treasuries 10Y is currently generating about 0.16 per unit of volatility. If you would invest 743,900 in WisdomTree Treasuries 10Y on August 31, 2024 and sell it today you would earn a total of 89,650 from holding WisdomTree Treasuries 10Y or generate 12.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
WisdomTree Brent Crude vs. WisdomTree Treasuries 10Y
Performance |
| Timeline |
| WisdomTree Brent Crude |
| WisdomTree Treasuries 10Y |
WisdomTree Brent and WisdomTree Treasuries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Brent and WisdomTree Treasuries
The main advantage of trading using opposite WisdomTree Brent and WisdomTree Treasuries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Brent position performs unexpectedly, WisdomTree Treasuries 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 Treasuries will offset losses from the drop in WisdomTree Treasuries' long position.| WisdomTree Brent vs. GraniteShares 3x Short | WisdomTree Brent vs. WisdomTree Natural Gas | WisdomTree Brent vs. Leverage Shares 3x | WisdomTree Brent vs. WisdomTree Natural Gas |
| WisdomTree Treasuries vs. WisdomTree Zinc | WisdomTree Treasuries vs. WisdomTree Brent Crude | WisdomTree Treasuries vs. WisdomTree Aluminium 2x | WisdomTree Treasuries vs. WisdomTree Enhanced Commodity |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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