Correlation Between WisdomTree Energy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both WisdomTree Energy and Dow Jones 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 Energy and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Energy and Dow Jones Industrial, you can compare the effects of market volatilities on WisdomTree Energy and Dow Jones 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 Energy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Energy and Dow Jones.
Diversification Opportunities for WisdomTree Energy and Dow Jones
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between WisdomTree and Dow is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Energy and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and WisdomTree Energy 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 Energy are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of WisdomTree Energy i.e., WisdomTree Energy and Dow Jones go up and down completely randomly.
Pair Corralation between WisdomTree Energy and Dow Jones
Assuming the 90 days trading horizon WisdomTree Energy is expected to generate 7.48 times less return on investment than Dow Jones. In addition to that, WisdomTree Energy is 2.23 times more volatile than Dow Jones Industrial. It trades about 0.01 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.09 per unit of volatility. If you would invest 3,225,486 in Dow Jones Industrial on November 28, 2024 and sell it today you would earn a total of 1,136,630 from holding Dow Jones Industrial or generate 35.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.4% |
| Values | Daily Returns |
WisdomTree Energy vs. Dow Jones Industrial
Performance |
| Timeline |
WisdomTree Energy and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
WisdomTree Energy
Pair trading matchups for WisdomTree Energy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with WisdomTree Energy and Dow Jones
The main advantage of trading using opposite WisdomTree Energy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Energy position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| WisdomTree Energy vs. WisdomTree Zinc | WisdomTree Energy vs. WisdomTree Brent Crude | WisdomTree Energy vs. WisdomTree Aluminium 2x | WisdomTree Energy vs. WisdomTree Enhanced Commodity |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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