Correlation Between WisdomTree Natural and IShares Treasury
Can any of the company-specific risk be diversified away by investing in both WisdomTree Natural and IShares Treasury 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 IShares Treasury 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 iShares Treasury Bond, you can compare the effects of market volatilities on WisdomTree Natural and IShares Treasury 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 IShares Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Natural and IShares Treasury.
Diversification Opportunities for WisdomTree Natural and IShares Treasury
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WisdomTree and IShares is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and iShares Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Treasury Bond 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 IShares Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Treasury Bond has no effect on the direction of WisdomTree Natural i.e., WisdomTree Natural and IShares Treasury go up and down completely randomly.
Pair Corralation between WisdomTree Natural and IShares Treasury
Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to generate 4.18 times more return on investment than IShares Treasury. However, WisdomTree Natural is 4.18 times more volatile than iShares Treasury Bond. It trades about 0.15 of its potential returns per unit of risk. iShares Treasury Bond is currently generating about 0.08 per unit of risk. If you would invest 49,395 in WisdomTree Natural Gas on September 1, 2024 and sell it today you would earn a total of 6,120 from holding WisdomTree Natural Gas or generate 12.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
WisdomTree Natural Gas vs. iShares Treasury Bond
Performance |
| Timeline |
| WisdomTree Natural Gas |
| iShares Treasury Bond |
WisdomTree Natural and IShares Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Natural and IShares Treasury
The main advantage of trading using opposite WisdomTree Natural and IShares Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Natural position performs unexpectedly, IShares Treasury 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 Treasury will offset losses from the drop in IShares Treasury's long position.| WisdomTree Natural vs. WisdomTree Zinc | WisdomTree Natural vs. WisdomTree Brent Crude | WisdomTree Natural vs. WisdomTree Aluminium 2x | WisdomTree Natural vs. WisdomTree Enhanced Commodity |
| IShares Treasury vs. WisdomTree Natural Gas | IShares Treasury vs. WisdomTree Natural Gas | IShares Treasury vs. Leverage Shares 2x | IShares Treasury vs. WisdomTree Silver 3x |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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