Correlation Between WisdomTree Natural and WisdomTree Brent
Can any of the company-specific risk be diversified away by investing in both WisdomTree Natural and WisdomTree Brent 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 WisdomTree Brent 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 WisdomTree Brent Crude, you can compare the effects of market volatilities on WisdomTree Natural and WisdomTree Brent 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 WisdomTree Brent. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Natural and WisdomTree Brent.
Diversification Opportunities for WisdomTree Natural and WisdomTree Brent
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and WisdomTree Brent Crude in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Brent Crude 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 WisdomTree Brent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Brent Crude has no effect on the direction of WisdomTree Natural i.e., WisdomTree Natural and WisdomTree Brent go up and down completely randomly.
Pair Corralation between WisdomTree Natural and WisdomTree Brent
Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to generate 2.98 times more return on investment than WisdomTree Brent. However, WisdomTree Natural is 2.98 times more volatile than WisdomTree Brent Crude. It trades about 0.09 of its potential returns per unit of risk. WisdomTree Brent Crude is currently generating about -0.04 per unit of risk. If you would invest 95,982 in WisdomTree Natural Gas on September 4, 2024 and sell it today you would earn a total of 8,593 from holding WisdomTree Natural Gas or generate 8.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Natural Gas vs. WisdomTree Brent Crude
Performance |
| Timeline |
| WisdomTree Natural Gas |
| WisdomTree Brent Crude |
WisdomTree Natural and WisdomTree Brent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Natural and WisdomTree Brent
The main advantage of trading using opposite WisdomTree Natural and WisdomTree Brent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Natural position performs unexpectedly, WisdomTree Brent 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 Brent will offset losses from the drop in WisdomTree Brent's long position.| WisdomTree Natural vs. WisdomTree Natural Gas | WisdomTree Natural vs. Leverage Shares 2x | WisdomTree Natural vs. WisdomTree Silver 3x | WisdomTree Natural vs. Leverage Shares 2x |
| WisdomTree Brent vs. WisdomTree Natural Gas | WisdomTree Brent vs. WisdomTree Natural Gas | WisdomTree Brent vs. Leverage Shares 2x | WisdomTree Brent 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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