Correlation Between MicroSectors FANG and WisdomTree Trust
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG 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 MicroSectors FANG and WisdomTree Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG ETN and WisdomTree Trust , you can compare the effects of market volatilities on MicroSectors FANG 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 MicroSectors FANG with a short position of WisdomTree Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and WisdomTree Trust.
Diversification Opportunities for MicroSectors FANG and WisdomTree Trust
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MicroSectors and WisdomTree is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG ETN and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust and MicroSectors FANG 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 MicroSectors FANG ETN 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 MicroSectors FANG i.e., MicroSectors FANG and WisdomTree Trust go up and down completely randomly.
Pair Corralation between MicroSectors FANG and WisdomTree Trust
Given the investment horizon of 90 days MicroSectors FANG ETN is expected to generate 2.16 times more return on investment than WisdomTree Trust. However, MicroSectors FANG is 2.16 times more volatile than WisdomTree Trust . It trades about 0.12 of its potential returns per unit of risk. WisdomTree Trust is currently generating about 0.06 per unit of risk. If you would invest 2,453 in MicroSectors FANG ETN on November 2, 2024 and sell it today you would earn a total of 3,431 from holding MicroSectors FANG ETN or generate 139.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG ETN vs. WisdomTree Trust
Performance |
| Timeline |
| MicroSectors FANG ETN |
| WisdomTree Trust |
MicroSectors FANG and WisdomTree Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and WisdomTree Trust
The main advantage of trading using opposite MicroSectors FANG and WisdomTree Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG 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.| MicroSectors FANG vs. MicroSectors Gold 3X | MicroSectors FANG vs. MicroSectors Travel 3X | MicroSectors FANG vs. MicroSectors Travel 3X | MicroSectors FANG vs. MicroSectors FANG Index |
| WisdomTree Trust vs. WisdomTree International Al | WisdomTree Trust vs. QRAFT AI Enhanced Large | WisdomTree Trust vs. WisdomTree Trust | WisdomTree Trust vs. QRAFT AI Enhanced Large |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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