Correlation Between WisdomTree Natural and WisdomTree Enhanced
Can any of the company-specific risk be diversified away by investing in both WisdomTree Natural 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 Natural 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 Natural Gas and WisdomTree Enhanced Commodity, you can compare the effects of market volatilities on WisdomTree Natural 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 Natural with a short position of WisdomTree Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Natural and WisdomTree Enhanced.
Diversification Opportunities for WisdomTree Natural and WisdomTree Enhanced
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas 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 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 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 Natural i.e., WisdomTree Natural and WisdomTree Enhanced go up and down completely randomly.
Pair Corralation between WisdomTree Natural and WisdomTree Enhanced
Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to generate 15.62 times more return on investment than WisdomTree Enhanced. However, WisdomTree Natural is 15.62 times more volatile than WisdomTree Enhanced Commodity. It trades about 0.3 of its potential returns per unit of risk. WisdomTree Enhanced Commodity is currently generating about 0.01 per unit of risk. If you would invest 141,982 in WisdomTree Natural Gas on November 29, 2024 and sell it today you would earn a total of 122,050 from holding WisdomTree Natural Gas or generate 85.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Natural Gas vs. WisdomTree Enhanced Commodity
Performance |
| Timeline |
| WisdomTree Natural Gas |
| WisdomTree Enhanced |
WisdomTree Natural and WisdomTree Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Natural and WisdomTree Enhanced
The main advantage of trading using opposite WisdomTree Natural and WisdomTree Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Natural 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 Natural vs. WisdomTree Zinc | WisdomTree Natural vs. WisdomTree Brent Crude | WisdomTree Natural vs. WisdomTree Aluminium 2x | WisdomTree Natural vs. WisdomTree Enhanced Commodity |
| WisdomTree Enhanced vs. WisdomTree Zinc | WisdomTree Enhanced vs. WisdomTree Brent Crude | WisdomTree Enhanced vs. WisdomTree Aluminium 2x | WisdomTree Enhanced vs. WisdomTree Gold 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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