Correlation Between IShares SP and WisdomTree Trust
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 IShares SP and WisdomTree Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and WisdomTree Trust , you can compare the effects of market volatilities on IShares SP 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 IShares SP with a short position of WisdomTree Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and WisdomTree Trust.
Diversification Opportunities for IShares SP and WisdomTree Trust
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and WisdomTree is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust and IShares SP 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 SP 500 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 IShares SP i.e., IShares SP and WisdomTree Trust go up and down completely randomly.
Pair Corralation between IShares SP and WisdomTree Trust
Considering the 90-day investment horizon IShares SP is expected to generate 4.43 times less return on investment than WisdomTree Trust. But when comparing it to its historical volatility, iShares SP 500 is 1.43 times less risky than WisdomTree Trust. It trades about 0.12 of its potential returns per unit of risk. WisdomTree Trust is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 8,117 in WisdomTree Trust on August 24, 2024 and sell it today you would earn a total of 740.00 from holding WisdomTree Trust or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. WisdomTree Trust
Performance |
| Timeline |
| iShares SP 500 |
| WisdomTree Trust |
IShares SP and WisdomTree Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and WisdomTree Trust
The main advantage of trading using opposite IShares SP and WisdomTree Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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.| IShares SP vs. iShares SP 500 | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap |
| WisdomTree Trust vs. Invesco SP MidCap | WisdomTree Trust vs. Invesco SP MidCap | WisdomTree Trust vs. Invesco SP 500 | WisdomTree Trust vs. Vanguard Value Factor |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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