Correlation Between IShares Dow and WisdomTree Short
Can any of the company-specific risk be diversified away by investing in both IShares Dow and WisdomTree Short 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 IShares Dow and WisdomTree Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Dow Jones and WisdomTree Short GBP, you can compare the effects of market volatilities on IShares Dow and WisdomTree Short 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 IShares Dow with a short position of WisdomTree Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Dow and WisdomTree Short.
Diversification Opportunities for IShares Dow and WisdomTree Short
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and WisdomTree is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding iShares Dow Jones and WisdomTree Short GBP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Short GBP and IShares Dow 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 iShares Dow Jones are associated (or correlated) with WisdomTree Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Short GBP has no effect on the direction of IShares Dow i.e., IShares Dow and WisdomTree Short go up and down completely randomly.
Pair Corralation between IShares Dow and WisdomTree Short
Assuming the 90 days trading horizon IShares Dow is expected to generate 1.75 times less return on investment than WisdomTree Short. In addition to that, IShares Dow is 1.16 times more volatile than WisdomTree Short GBP. It trades about 0.12 of its total potential returns per unit of risk. WisdomTree Short GBP is currently generating about 0.24 per unit of volatility. If you would invest 6,014 in WisdomTree Short GBP on September 4, 2024 and sell it today you would earn a total of 161.00 from holding WisdomTree Short GBP or generate 2.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Dow Jones vs. WisdomTree Short GBP
Performance |
| Timeline |
| iShares Dow Jones |
| WisdomTree Short GBP |
IShares Dow and WisdomTree Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Dow and WisdomTree Short
The main advantage of trading using opposite IShares Dow and WisdomTree Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Dow position performs unexpectedly, WisdomTree Short 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 Short will offset losses from the drop in WisdomTree Short's long position.| IShares Dow vs. iShares MSCI Japan | IShares Dow vs. iShares JP Morgan | IShares Dow vs. iShares MSCI Europe | IShares Dow vs. iShares Nasdaq Biotechnology |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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