Correlation Between WisdomTree and WisdomTree Natural
Can any of the company-specific risk be diversified away by investing in both WisdomTree and WisdomTree Natural 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 and WisdomTree Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree SP 500 and WisdomTree Natural Gas, you can compare the effects of market volatilities on WisdomTree and WisdomTree Natural 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 with a short position of WisdomTree Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and WisdomTree Natural.
Diversification Opportunities for WisdomTree and WisdomTree Natural
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and WisdomTree Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Natural Gas and WisdomTree 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 SP 500 are associated (or correlated) with WisdomTree Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Natural Gas has no effect on the direction of WisdomTree i.e., WisdomTree and WisdomTree Natural go up and down completely randomly.
Pair Corralation between WisdomTree and WisdomTree Natural
Assuming the 90 days trading horizon WisdomTree SP 500 is expected to under-perform the WisdomTree Natural. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree SP 500 is 4.81 times less risky than WisdomTree Natural. The etf trades about -0.23 of its potential returns per unit of risk. The WisdomTree Natural Gas is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 86,363 in WisdomTree Natural Gas on September 2, 2024 and sell it today you would earn a total of 26,420 from holding WisdomTree Natural Gas or generate 30.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree SP 500 vs. WisdomTree Natural Gas
Performance |
| Timeline |
| WisdomTree SP 500 |
| WisdomTree Natural Gas |
WisdomTree and WisdomTree Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree and WisdomTree Natural
The main advantage of trading using opposite WisdomTree and WisdomTree Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree position performs unexpectedly, WisdomTree Natural 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 Natural will offset losses from the drop in WisdomTree Natural's long position.| WisdomTree vs. WisdomTree Natural Gas | WisdomTree vs. Leverage Shares 3x | WisdomTree vs. WisdomTree Natural Gas | WisdomTree vs. WisdomTree Silver 3x |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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