Correlation Between WisdomTree Brent and WisdomTree Enhanced
Can any of the company-specific risk be diversified away by investing in both WisdomTree Brent and WisdomTree Enhanced 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 Enhanced 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 Enhanced Commodity, you can compare the effects of market volatilities on WisdomTree Brent and WisdomTree Enhanced 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 Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Brent and WisdomTree Enhanced.
Diversification Opportunities for WisdomTree Brent and WisdomTree Enhanced
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Brent Crude and WisdomTree Enhanced Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Enhanced 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 Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Enhanced has no effect on the direction of WisdomTree Brent i.e., WisdomTree Brent and WisdomTree Enhanced go up and down completely randomly.
Pair Corralation between WisdomTree Brent and WisdomTree Enhanced
Assuming the 90 days trading horizon WisdomTree Brent is expected to generate 1.72 times less return on investment than WisdomTree Enhanced. In addition to that, WisdomTree Brent is 5.36 times more volatile than WisdomTree Enhanced Commodity. It trades about 0.01 of its total potential returns per unit of risk. WisdomTree Enhanced Commodity is currently generating about 0.12 per unit of volatility. If you would invest 104,200 in WisdomTree Enhanced Commodity on August 31, 2024 and sell it today you would earn a total of 1,725 from holding WisdomTree Enhanced Commodity or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Brent Crude vs. WisdomTree Enhanced Commodity
Performance |
| Timeline |
| WisdomTree Brent Crude |
| WisdomTree Enhanced |
WisdomTree Brent and WisdomTree Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Brent and WisdomTree Enhanced
The main advantage of trading using opposite WisdomTree Brent and WisdomTree Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Brent position performs unexpectedly, WisdomTree Enhanced 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 Enhanced will offset losses from the drop in WisdomTree Enhanced's 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 Enhanced vs. WisdomTree Natural Gas | WisdomTree Enhanced vs. WisdomTree Natural Gas | WisdomTree Enhanced vs. Leverage Shares 2x | WisdomTree Enhanced vs. WisdomTree Silver 3x |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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