Correlation Between WisdomTree NASDAQ and WisdomTree Brent
Can any of the company-specific risk be diversified away by investing in both WisdomTree NASDAQ and WisdomTree Brent 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 NASDAQ and WisdomTree Brent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree NASDAQ 100 and WisdomTree Brent Crude, you can compare the effects of market volatilities on WisdomTree NASDAQ and WisdomTree Brent 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 NASDAQ with a short position of WisdomTree Brent. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree NASDAQ and WisdomTree Brent.
Diversification Opportunities for WisdomTree NASDAQ and WisdomTree Brent
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between WisdomTree and WisdomTree is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree NASDAQ 100 and WisdomTree Brent Crude in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Brent Crude and WisdomTree NASDAQ 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 NASDAQ 100 are associated (or correlated) with WisdomTree Brent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Brent Crude has no effect on the direction of WisdomTree NASDAQ i.e., WisdomTree NASDAQ and WisdomTree Brent go up and down completely randomly.
Pair Corralation between WisdomTree NASDAQ and WisdomTree Brent
Assuming the 90 days trading horizon WisdomTree NASDAQ is expected to generate 1.8 times less return on investment than WisdomTree Brent. But when comparing it to its historical volatility, WisdomTree NASDAQ 100 is 1.11 times less risky than WisdomTree Brent. It trades about 0.06 of its potential returns per unit of risk. WisdomTree Brent Crude is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,525 in WisdomTree Brent Crude on August 30, 2024 and sell it today you would earn a total of 172.00 from holding WisdomTree Brent Crude or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree NASDAQ 100 vs. WisdomTree Brent Crude
Performance |
| Timeline |
| WisdomTree NASDAQ 100 |
| WisdomTree Brent Crude |
WisdomTree NASDAQ and WisdomTree Brent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree NASDAQ and WisdomTree Brent
The main advantage of trading using opposite WisdomTree NASDAQ and WisdomTree Brent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree NASDAQ position performs unexpectedly, WisdomTree Brent 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 Brent will offset losses from the drop in WisdomTree Brent's long position.| WisdomTree NASDAQ vs. WisdomTree Zinc | WisdomTree NASDAQ vs. WisdomTree Brent Crude | WisdomTree NASDAQ vs. WisdomTree Aluminium 2x | WisdomTree NASDAQ vs. WisdomTree Enhanced Commodity |
| WisdomTree Brent vs. GraniteShares 3x Short | WisdomTree Brent vs. WisdomTree Natural Gas | WisdomTree Brent vs. Leverage Shares 3x | WisdomTree Brent vs. WisdomTree Natural Gas |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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