Correlation Between WisdomTree Dynamic and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree Dynamic and First Trust 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 Dynamic and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Dynamic Currency and First Trust STOXX, you can compare the effects of market volatilities on WisdomTree Dynamic and First Trust 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 Dynamic with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Dynamic and First Trust.
Diversification Opportunities for WisdomTree Dynamic and First Trust
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and First is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Dynamic Currency and First Trust STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust STOXX and WisdomTree Dynamic 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 Dynamic Currency are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust STOXX has no effect on the direction of WisdomTree Dynamic i.e., WisdomTree Dynamic and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree Dynamic and First Trust
Given the investment horizon of 90 days WisdomTree Dynamic Currency is expected to generate 0.91 times more return on investment than First Trust. However, WisdomTree Dynamic Currency is 1.1 times less risky than First Trust. It trades about 0.01 of its potential returns per unit of risk. First Trust STOXX is currently generating about -0.04 per unit of risk. If you would invest 3,452 in WisdomTree Dynamic Currency on August 30, 2024 and sell it today you would earn a total of 3.00 from holding WisdomTree Dynamic Currency or generate 0.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Dynamic Currency vs. First Trust STOXX
Performance |
| Timeline |
| WisdomTree Dynamic |
| First Trust STOXX |
WisdomTree Dynamic and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Dynamic and First Trust
The main advantage of trading using opposite WisdomTree Dynamic and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Dynamic position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| WisdomTree Dynamic vs. WisdomTree Dynamic Currency | WisdomTree Dynamic vs. WisdomTree Europe Quality | WisdomTree Dynamic vs. WisdomTree Europe Hedged | WisdomTree Dynamic vs. WisdomTree International Hedged |
| First Trust vs. First Trust Dow | First Trust vs. WisdomTree Europe SmallCap | First Trust vs. WisdomTree International High | First Trust vs. WisdomTree Global High |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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