Correlation Between WisdomTree WTI and WisdomTree Gold
Can any of the company-specific risk be diversified away by investing in both WisdomTree WTI and WisdomTree Gold 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 WTI and WisdomTree Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree WTI Crude and WisdomTree Gold 3x, you can compare the effects of market volatilities on WisdomTree WTI and WisdomTree Gold 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 WTI with a short position of WisdomTree Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree WTI and WisdomTree Gold.
Diversification Opportunities for WisdomTree WTI and WisdomTree Gold
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WisdomTree and WisdomTree is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree WTI Crude and WisdomTree Gold 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Gold 3x and WisdomTree WTI 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 WTI Crude are associated (or correlated) with WisdomTree Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Gold 3x has no effect on the direction of WisdomTree WTI i.e., WisdomTree WTI and WisdomTree Gold go up and down completely randomly.
Pair Corralation between WisdomTree WTI and WisdomTree Gold
Assuming the 90 days trading horizon WisdomTree WTI Crude is expected to generate 1.25 times more return on investment than WisdomTree Gold. However, WisdomTree WTI is 1.25 times more volatile than WisdomTree Gold 3x. It trades about 0.0 of its potential returns per unit of risk. WisdomTree Gold 3x is currently generating about -0.09 per unit of risk. If you would invest 1,138 in WisdomTree WTI Crude on September 2, 2024 and sell it today you would lose (65.00) from holding WisdomTree WTI Crude or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree WTI Crude vs. WisdomTree Gold 3x
Performance |
| Timeline |
| WisdomTree WTI Crude |
| WisdomTree Gold 3x |
WisdomTree WTI and WisdomTree Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree WTI and WisdomTree Gold
The main advantage of trading using opposite WisdomTree WTI and WisdomTree Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree WTI position performs unexpectedly, WisdomTree Gold 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 Gold will offset losses from the drop in WisdomTree Gold's long position.| WisdomTree WTI vs. GraniteShares 3x Short | WisdomTree WTI vs. WisdomTree Natural Gas | WisdomTree WTI vs. Leverage Shares 3x | WisdomTree WTI vs. WisdomTree SP 500 |
| WisdomTree Gold vs. GraniteShares 3x Short | WisdomTree Gold vs. WisdomTree Natural Gas | WisdomTree Gold vs. Leverage Shares 3x | WisdomTree Gold vs. WisdomTree SP 500 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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