Correlation Between WisdomTree Natural and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree Natural and First 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 WisdomTree Natural and First Trust 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 First Trust Nasdaq, you can compare the effects of market volatilities on WisdomTree Natural and First 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 WisdomTree Natural with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Natural and First Trust.
Diversification Opportunities for WisdomTree Natural and First Trust
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WisdomTree and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Nasdaq has no effect on the direction of WisdomTree Natural i.e., WisdomTree Natural and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree Natural and First Trust
Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to under-perform the First Trust. In addition to that, WisdomTree Natural is 3.19 times more volatile than First Trust Nasdaq. It trades about -0.05 of its total potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.07 per unit of volatility. If you would invest 274,125 in First Trust Nasdaq on August 31, 2024 and sell it today you would earn a total of 65,950 from holding First Trust Nasdaq or generate 24.06% 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. First Trust Nasdaq
Performance |
| Timeline |
| WisdomTree Natural Gas |
| First Trust Nasdaq |
WisdomTree Natural and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Natural and First Trust
The main advantage of trading using opposite WisdomTree Natural and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Natural position performs unexpectedly, First 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 First Trust will offset losses from the drop in First Trust's long position.| WisdomTree Natural vs. Vanguard FTSE Developed | WisdomTree Natural vs. Leverage Shares 2x | WisdomTree Natural vs. Amundi Index Solutions | WisdomTree Natural vs. Amundi Index Solutions |
| First Trust vs. Leverage Shares 3x | First Trust vs. WisdomTree Natural Gas | First Trust vs. GraniteShares 3x Short | First Trust vs. Leverage Shares 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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