Correlation Between WisdomTree and IShares Treasury
Can any of the company-specific risk be diversified away by investing in both WisdomTree and IShares Treasury 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 IShares Treasury 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 iShares Treasury Bond, you can compare the effects of market volatilities on WisdomTree and IShares Treasury 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 IShares Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and IShares Treasury.
Diversification Opportunities for WisdomTree and IShares Treasury
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and iShares Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Treasury Bond 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 IShares Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Treasury Bond has no effect on the direction of WisdomTree i.e., WisdomTree and IShares Treasury go up and down completely randomly.
Pair Corralation between WisdomTree and IShares Treasury
Assuming the 90 days trading horizon WisdomTree SP 500 is expected to under-perform the IShares Treasury. In addition to that, WisdomTree is 2.54 times more volatile than iShares Treasury Bond. It trades about -0.08 of its total potential returns per unit of risk. iShares Treasury Bond is currently generating about -0.02 per unit of volatility. If you would invest 371.00 in iShares Treasury Bond on August 27, 2024 and sell it today you would lose (32.00) from holding iShares Treasury Bond or give up 8.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree SP 500 vs. iShares Treasury Bond
Performance |
| Timeline |
| WisdomTree SP 500 |
| iShares Treasury Bond |
WisdomTree and IShares Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree and IShares Treasury
The main advantage of trading using opposite WisdomTree and IShares Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree position performs unexpectedly, IShares Treasury 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 IShares Treasury will offset losses from the drop in IShares Treasury's long position.| WisdomTree vs. WisdomTree Silver 3x | WisdomTree vs. Lyxor 10Y Inflation | WisdomTree vs. GraniteShares 3x Long | WisdomTree vs. GraniteShares 3x Short |
| IShares Treasury vs. Leverage Shares 3x | IShares Treasury vs. WisdomTree SP 500 | IShares Treasury vs. WisdomTree Silver 3x | IShares Treasury vs. Leverage Shares 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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