Correlation Between WisdomTree Natural and PIMCO Dollar
Can any of the company-specific risk be diversified away by investing in both WisdomTree Natural and PIMCO Dollar 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 Natural and PIMCO Dollar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Natural Gas and PIMCO Dollar Short, you can compare the effects of market volatilities on WisdomTree Natural and PIMCO Dollar 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 Natural with a short position of PIMCO Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Natural and PIMCO Dollar.
Diversification Opportunities for WisdomTree Natural and PIMCO Dollar
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between WisdomTree and PIMCO is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and PIMCO Dollar Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Dollar Short and WisdomTree Natural 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 Natural Gas are associated (or correlated) with PIMCO Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Dollar Short has no effect on the direction of WisdomTree Natural i.e., WisdomTree Natural and PIMCO Dollar go up and down completely randomly.
Pair Corralation between WisdomTree Natural and PIMCO Dollar
Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to generate 338.57 times more return on investment than PIMCO Dollar. However, WisdomTree Natural is 338.57 times more volatile than PIMCO Dollar Short. It trades about 0.05 of its potential returns per unit of risk. PIMCO Dollar Short is currently generating about 0.7 per unit of risk. If you would invest 2,574,900 in WisdomTree Natural Gas on September 3, 2024 and sell it today you would lose (1,968,050) from holding WisdomTree Natural Gas or give up 76.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Natural Gas vs. PIMCO Dollar Short
Performance |
| Timeline |
| WisdomTree Natural Gas |
| PIMCO Dollar Short |
WisdomTree Natural and PIMCO Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Natural and PIMCO Dollar
The main advantage of trading using opposite WisdomTree Natural and PIMCO Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Natural position performs unexpectedly, PIMCO Dollar 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 PIMCO Dollar will offset losses from the drop in PIMCO Dollar's long position.| WisdomTree Natural vs. WisdomTree Natural Gas | WisdomTree Natural vs. WisdomTree Natural Gas | WisdomTree Natural vs. Leverage Shares 2x | WisdomTree Natural vs. WisdomTree Silver 3x |
| PIMCO Dollar vs. Leverage Shares 3x | PIMCO Dollar vs. WisdomTree Natural Gas | PIMCO Dollar vs. Leverage Shares 3x | PIMCO Dollar vs. GraniteShares 3x Short |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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