Correlation Between WisdomTree Physical and WisdomTree Ethereum
Can any of the company-specific risk be diversified away by investing in both WisdomTree Physical and WisdomTree Ethereum 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 Physical and WisdomTree Ethereum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Physical Bitcoin and WisdomTree Ethereum ETC, you can compare the effects of market volatilities on WisdomTree Physical and WisdomTree Ethereum 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 Physical with a short position of WisdomTree Ethereum. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Physical and WisdomTree Ethereum.
Diversification Opportunities for WisdomTree Physical and WisdomTree Ethereum
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Physical Bitcoin and WisdomTree Ethereum ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Ethereum ETC and WisdomTree Physical 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 Physical Bitcoin are associated (or correlated) with WisdomTree Ethereum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Ethereum ETC has no effect on the direction of WisdomTree Physical i.e., WisdomTree Physical and WisdomTree Ethereum go up and down completely randomly.
Pair Corralation between WisdomTree Physical and WisdomTree Ethereum
Assuming the 90 days trading horizon WisdomTree Physical Bitcoin is expected to generate 0.53 times more return on investment than WisdomTree Ethereum. However, WisdomTree Physical Bitcoin is 1.9 times less risky than WisdomTree Ethereum. It trades about -0.15 of its potential returns per unit of risk. WisdomTree Ethereum ETC is currently generating about -0.2 per unit of risk. If you would invest 2,123 in WisdomTree Physical Bitcoin on December 2, 2024 and sell it today you would lose (343.00) from holding WisdomTree Physical Bitcoin or give up 16.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Physical Bitcoin vs. WisdomTree Ethereum ETC
Performance |
| Timeline |
| WisdomTree Physical |
| WisdomTree Ethereum ETC |
WisdomTree Physical and WisdomTree Ethereum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Physical and WisdomTree Ethereum
The main advantage of trading using opposite WisdomTree Physical and WisdomTree Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Physical position performs unexpectedly, WisdomTree Ethereum 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 Ethereum will offset losses from the drop in WisdomTree Ethereum's long position.| WisdomTree Physical vs. WisdomTree Ethereum ETC | ||
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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