Correlation Between WisdomTree and WisdomTree Petroleum
Can any of the company-specific risk be diversified away by investing in both WisdomTree and WisdomTree Petroleum 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 Petroleum 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 Petroleum 2x, you can compare the effects of market volatilities on WisdomTree and WisdomTree Petroleum 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 Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and WisdomTree Petroleum.
Diversification Opportunities for WisdomTree and WisdomTree Petroleum
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WisdomTree and WisdomTree is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and WisdomTree Petroleum 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Petroleum 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 Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Petroleum has no effect on the direction of WisdomTree i.e., WisdomTree and WisdomTree Petroleum go up and down completely randomly.
Pair Corralation between WisdomTree and WisdomTree Petroleum
Assuming the 90 days trading horizon WisdomTree SP 500 is expected to generate 0.68 times more return on investment than WisdomTree Petroleum. However, WisdomTree SP 500 is 1.48 times less risky than WisdomTree Petroleum. It trades about 0.09 of its potential returns per unit of risk. WisdomTree Petroleum 2x is currently generating about 0.02 per unit of risk. If you would invest 5,054 in WisdomTree SP 500 on November 2, 2024 and sell it today you would earn a total of 7,013 from holding WisdomTree SP 500 or generate 138.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
WisdomTree SP 500 vs. WisdomTree Petroleum 2x
Performance |
| Timeline |
| WisdomTree SP 500 |
| WisdomTree Petroleum |
WisdomTree and WisdomTree Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree and WisdomTree Petroleum
The main advantage of trading using opposite WisdomTree and WisdomTree Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree position performs unexpectedly, WisdomTree Petroleum 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 Petroleum will offset losses from the drop in WisdomTree Petroleum's long position.| WisdomTree vs. WisdomTree Zinc | WisdomTree vs. WisdomTree Brent Crude | WisdomTree vs. WisdomTree Aluminium 2x | WisdomTree vs. WisdomTree Enhanced Commodity |
| WisdomTree Petroleum vs. WisdomTree Zinc | WisdomTree Petroleum vs. WisdomTree Brent Crude | WisdomTree Petroleum vs. WisdomTree Aluminium 2x | WisdomTree Petroleum vs. WisdomTree Enhanced Commodity |
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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