Correlation Between WisdomTree Natural and WisdomTree Coffee
Can any of the company-specific risk be diversified away by investing in both WisdomTree Natural and WisdomTree Coffee 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 WisdomTree Coffee 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 WisdomTree Coffee 2x, you can compare the effects of market volatilities on WisdomTree Natural and WisdomTree Coffee 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 WisdomTree Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Natural and WisdomTree Coffee.
Diversification Opportunities for WisdomTree Natural and WisdomTree Coffee
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and WisdomTree Coffee 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Coffee 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 WisdomTree Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Coffee has no effect on the direction of WisdomTree Natural i.e., WisdomTree Natural and WisdomTree Coffee go up and down completely randomly.
Pair Corralation between WisdomTree Natural and WisdomTree Coffee
Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to generate 1.45 times more return on investment than WisdomTree Coffee. However, WisdomTree Natural is 1.45 times more volatile than WisdomTree Coffee 2x. It trades about -0.03 of its potential returns per unit of risk. WisdomTree Coffee 2x is currently generating about -0.25 per unit of risk. If you would invest 53,300 in WisdomTree Natural Gas on November 26, 2025 and sell it today you would lose (9,010) from holding WisdomTree Natural Gas or give up 16.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Natural Gas vs. WisdomTree Coffee 2x
Performance |
| Timeline |
| WisdomTree Natural Gas |
| WisdomTree Coffee |
WisdomTree Natural and WisdomTree Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Natural and WisdomTree Coffee
The main advantage of trading using opposite WisdomTree Natural and WisdomTree Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Natural position performs unexpectedly, WisdomTree Coffee 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 Coffee will offset losses from the drop in WisdomTree Coffee's long position.| WisdomTree Natural vs. Leverage Shares 2x | WisdomTree Natural vs. Leverage Shares 3x | WisdomTree Natural vs. Leverage Shares 3x | WisdomTree Natural vs. Leverage Shares 3x |
| WisdomTree Coffee vs. WisdomTree Zinc | WisdomTree Coffee vs. WisdomTree Brent Crude | WisdomTree Coffee vs. WisdomTree Aluminium 2x | WisdomTree Coffee vs. WisdomTree Enhanced Commodity |
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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