Correlation Between US Treasury and WisdomTree
Can any of the company-specific risk be diversified away by investing in both US Treasury and WisdomTree 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 US Treasury and WisdomTree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Treasury 12 and WisdomTree 7 10 Year, you can compare the effects of market volatilities on US Treasury and WisdomTree 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 US Treasury with a short position of WisdomTree. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and WisdomTree.
Diversification Opportunities for US Treasury and WisdomTree
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between OBIL and WisdomTree is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 and WisdomTree 7 10 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree 7 10 and US Treasury 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 US Treasury 12 are associated (or correlated) with WisdomTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree 7 10 has no effect on the direction of US Treasury i.e., US Treasury and WisdomTree go up and down completely randomly.
Pair Corralation between US Treasury and WisdomTree
Given the investment horizon of 90 days US Treasury is expected to generate 1.01 times less return on investment than WisdomTree. But when comparing it to its historical volatility, US Treasury 12 is 6.63 times less risky than WisdomTree. It trades about 0.29 of its potential returns per unit of risk. WisdomTree 7 10 Year is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,815 in WisdomTree 7 10 Year on September 13, 2024 and sell it today you would earn a total of 164.00 from holding WisdomTree 7 10 Year or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 38.46% |
| Values | Daily Returns |
US Treasury 12 vs. WisdomTree 7 10 Year
Performance |
| Timeline |
| US Treasury 12 |
| WisdomTree 7 10 |
US Treasury and WisdomTree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Treasury and WisdomTree
The main advantage of trading using opposite US Treasury and WisdomTree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury position performs unexpectedly, WisdomTree 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 will offset losses from the drop in WisdomTree's long position.| US Treasury vs. Vanguard Intermediate Term Treasury | US Treasury vs. Vanguard Long Term Treasury | US Treasury vs. Vanguard Short Term Corporate | US Treasury vs. Vanguard Short Term Inflation Protected |
| WisdomTree vs. Vanguard Long Term Treasury | WisdomTree vs. Vanguard Long Term Corporate | WisdomTree vs. Vanguard Long Term Bond | WisdomTree vs. Vanguard Intermediate Term Treasury |
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 CEOs Directory module to screen CEOs from public companies around the world.
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