Correlation Between WisdomTree Natural and LG Longer
Can any of the company-specific risk be diversified away by investing in both WisdomTree Natural and LG Longer 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 Natural and LG Longer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Natural Gas and LG Longer Dated, you can compare the effects of market volatilities on WisdomTree Natural and LG Longer 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 Natural with a short position of LG Longer. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Natural and LG Longer.
Diversification Opportunities for WisdomTree Natural and LG Longer
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WisdomTree and COMF is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and LG Longer Dated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Longer Dated and WisdomTree Natural 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 Natural Gas are associated (or correlated) with LG Longer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Longer Dated has no effect on the direction of WisdomTree Natural i.e., WisdomTree Natural and LG Longer go up and down completely randomly.
Pair Corralation between WisdomTree Natural and LG Longer
Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to generate 8.23 times more return on investment than LG Longer. However, WisdomTree Natural is 8.23 times more volatile than LG Longer Dated. It trades about 0.08 of its potential returns per unit of risk. LG Longer Dated is currently generating about 0.22 per unit of risk. If you would invest 51,965 in WisdomTree Natural Gas on September 12, 2024 and sell it today you would earn a total of 3,200 from holding WisdomTree Natural Gas or generate 6.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Natural Gas vs. LG Longer Dated
Performance |
| Timeline |
| WisdomTree Natural Gas |
| LG Longer Dated |
WisdomTree Natural and LG Longer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Natural and LG Longer
The main advantage of trading using opposite WisdomTree Natural and LG Longer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Natural position performs unexpectedly, LG Longer 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 LG Longer will offset losses from the drop in LG Longer's long position.| WisdomTree Natural vs. GraniteShares 3x Short | WisdomTree Natural vs. Leverage Shares 3x | WisdomTree Natural vs. WisdomTree Natural Gas | WisdomTree Natural vs. WisdomTree SP 500 |
| LG Longer vs. iShares MSCI Japan | LG Longer vs. Amundi EUR High | LG Longer vs. iShares JP Morgan | LG Longer vs. Xtrackers MSCI |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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