Correlation Between SPDR SP and WisdomTree MidCap
Can any of the company-specific risk be diversified away by investing in both SPDR SP and WisdomTree MidCap 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 SPDR SP and WisdomTree MidCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 600 and WisdomTree MidCap Earnings, you can compare the effects of market volatilities on SPDR SP and WisdomTree MidCap 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 SPDR SP with a short position of WisdomTree MidCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and WisdomTree MidCap.
Diversification Opportunities for SPDR SP and WisdomTree MidCap
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and WisdomTree is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 600 and WisdomTree MidCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree MidCap and SPDR SP 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 SPDR SP 600 are associated (or correlated) with WisdomTree MidCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree MidCap has no effect on the direction of SPDR SP i.e., SPDR SP and WisdomTree MidCap go up and down completely randomly.
Pair Corralation between SPDR SP and WisdomTree MidCap
Given the investment horizon of 90 days SPDR SP 600 is expected to generate 1.14 times more return on investment than WisdomTree MidCap. However, SPDR SP is 1.14 times more volatile than WisdomTree MidCap Earnings. It trades about 0.06 of its potential returns per unit of risk. WisdomTree MidCap Earnings is currently generating about 0.06 per unit of risk. If you would invest 8,606 in SPDR SP 600 on October 26, 2024 and sell it today you would earn a total of 356.00 from holding SPDR SP 600 or generate 4.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 600 vs. WisdomTree MidCap Earnings
Performance |
| Timeline |
| SPDR SP 600 |
| WisdomTree MidCap |
SPDR SP and WisdomTree MidCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and WisdomTree MidCap
The main advantage of trading using opposite SPDR SP and WisdomTree MidCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, WisdomTree MidCap 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 MidCap will offset losses from the drop in WisdomTree MidCap's long position.| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
| WisdomTree MidCap vs. WisdomTree SmallCap Earnings | WisdomTree MidCap vs. WisdomTree Earnings 500 | WisdomTree MidCap vs. WisdomTree MidCap Dividend | WisdomTree MidCap vs. NXG NextGen Infrastructure |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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