Correlation Between Dow Jones and WisdomTree MidCap
Can any of the company-specific risk be diversified away by investing in both Dow Jones and WisdomTree MidCap 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 Dow Jones and WisdomTree MidCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and WisdomTree MidCap Earnings, you can compare the effects of market volatilities on Dow Jones and WisdomTree MidCap 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 Dow Jones with a short position of WisdomTree MidCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and WisdomTree MidCap.
Diversification Opportunities for Dow Jones and WisdomTree MidCap
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and WisdomTree is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and WisdomTree MidCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree MidCap and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with WisdomTree MidCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree MidCap has no effect on the direction of Dow Jones i.e., Dow Jones and WisdomTree MidCap go up and down completely randomly.
Pair Corralation between Dow Jones and WisdomTree MidCap
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.35 times less return on investment than WisdomTree MidCap. But when comparing it to its historical volatility, Dow Jones Industrial is 1.52 times less risky than WisdomTree MidCap. It trades about 0.27 of its potential returns per unit of risk. WisdomTree MidCap Earnings is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 6,246 in WisdomTree MidCap Earnings on August 30, 2024 and sell it today you would earn a total of 494.00 from holding WisdomTree MidCap Earnings or generate 7.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. WisdomTree MidCap Earnings
Performance |
| Timeline |
Dow Jones and WisdomTree MidCap Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
WisdomTree MidCap Earnings
Pair trading matchups for WisdomTree MidCap
Pair Trading with Dow Jones and WisdomTree MidCap
The main advantage of trading using opposite Dow Jones and WisdomTree MidCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, WisdomTree MidCap 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 MidCap will offset losses from the drop in WisdomTree MidCap's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| WisdomTree MidCap vs. WisdomTree SmallCap Earnings | WisdomTree MidCap vs. WisdomTree Earnings 500 | WisdomTree MidCap vs. WisdomTree MidCap Dividend | WisdomTree MidCap vs. NXG NextGen Infrastructure |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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