Correlation Between WisdomTree Continuous and IShares SP
Can any of the company-specific risk be diversified away by investing in both WisdomTree Continuous and IShares SP 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 Continuous and IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Continuous Commodity and iShares SP GSCI, you can compare the effects of market volatilities on WisdomTree Continuous and IShares SP 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 Continuous with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Continuous and IShares SP.
Diversification Opportunities for WisdomTree Continuous and IShares SP
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Continuous Commodit and iShares SP GSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP GSCI and WisdomTree Continuous 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 Continuous Commodity are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP GSCI has no effect on the direction of WisdomTree Continuous i.e., WisdomTree Continuous and IShares SP go up and down completely randomly.
Pair Corralation between WisdomTree Continuous and IShares SP
Considering the 90-day investment horizon WisdomTree Continuous Commodity is expected to generate 0.87 times more return on investment than IShares SP. However, WisdomTree Continuous Commodity is 1.15 times less risky than IShares SP. It trades about 0.11 of its potential returns per unit of risk. iShares SP GSCI is currently generating about 0.07 per unit of risk. If you would invest 1,853 in WisdomTree Continuous Commodity on August 27, 2024 and sell it today you would earn a total of 38.00 from holding WisdomTree Continuous Commodity or generate 2.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Continuous Commodit vs. iShares SP GSCI
Performance |
| Timeline |
| WisdomTree Continuous |
| iShares SP GSCI |
WisdomTree Continuous and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Continuous and IShares SP
The main advantage of trading using opposite WisdomTree Continuous and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Continuous position performs unexpectedly, IShares SP 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 IShares SP will offset losses from the drop in IShares SP's long position.The idea behind WisdomTree Continuous Commodity and iShares SP GSCI 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.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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