Correlation Between WisdomTree Physical and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both WisdomTree Physical and SPDR Dow 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 Physical and SPDR Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Physical Gold and SPDR Dow Jones, you can compare the effects of market volatilities on WisdomTree Physical and SPDR Dow 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 Physical with a short position of SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Physical and SPDR Dow.
Diversification Opportunities for WisdomTree Physical and SPDR Dow
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and SPDR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Physical Gold and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones and WisdomTree Physical 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 Physical Gold are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of WisdomTree Physical i.e., WisdomTree Physical and SPDR Dow go up and down completely randomly.
Pair Corralation between WisdomTree Physical and SPDR Dow
Assuming the 90 days trading horizon WisdomTree Physical is expected to generate 5.79 times less return on investment than SPDR Dow. But when comparing it to its historical volatility, WisdomTree Physical Gold is 1.32 times less risky than SPDR Dow. It trades about 0.05 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 39,480 in SPDR Dow Jones on August 24, 2024 and sell it today you would earn a total of 2,325 from holding SPDR Dow Jones or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Physical Gold vs. SPDR Dow Jones
Performance |
| Timeline |
| WisdomTree Physical Gold |
| SPDR Dow Jones |
WisdomTree Physical and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Physical and SPDR Dow
The main advantage of trading using opposite WisdomTree Physical and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Physical position performs unexpectedly, SPDR Dow 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 SPDR Dow will offset losses from the drop in SPDR Dow's long position.| WisdomTree Physical vs. SPDR Dow Jones | WisdomTree Physical vs. iShares Core MSCI | WisdomTree Physical vs. iShares SP 500 | WisdomTree Physical vs. iShares Global Aggregate |
| SPDR Dow vs. SPDR MSCI World | SPDR Dow vs. SPDR SP Dividend | SPDR Dow vs. SPDR SP 500 | SPDR Dow vs. SPDR BB SB |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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