Correlation Between Ford and WisdomTree Trust
Can any of the company-specific risk be diversified away by investing in both Ford and WisdomTree 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 Ford and WisdomTree Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and WisdomTree Trust , you can compare the effects of market volatilities on Ford and WisdomTree 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 Ford with a short position of WisdomTree Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and WisdomTree Trust.
Diversification Opportunities for Ford and WisdomTree Trust
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and WisdomTree is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust and Ford 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 Ford Motor are associated (or correlated) with WisdomTree Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Trust has no effect on the direction of Ford i.e., Ford and WisdomTree Trust go up and down completely randomly.
Pair Corralation between Ford and WisdomTree Trust
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the WisdomTree Trust. In addition to that, Ford is 1.45 times more volatile than WisdomTree Trust . It trades about -0.01 of its total potential returns per unit of risk. WisdomTree Trust is currently generating about 0.03 per unit of volatility. If you would invest 1,903 in WisdomTree Trust on August 28, 2024 and sell it today you would earn a total of 306.00 from holding WisdomTree Trust or generate 16.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. WisdomTree Trust
Performance |
| Timeline |
| Ford Motor |
| WisdomTree Trust |
Ford and WisdomTree Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and WisdomTree Trust
The main advantage of trading using opposite Ford and WisdomTree Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, WisdomTree 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 WisdomTree Trust will offset losses from the drop in WisdomTree Trust's long position.The idea behind Ford Motor and WisdomTree Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| WisdomTree Trust vs. Invesco DWA Utilities | WisdomTree Trust vs. Invesco Dynamic Large | WisdomTree Trust vs. Invesco Dynamic Large | WisdomTree Trust vs. HUMANA INC |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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