Correlation Between SP 500 and WisdomTree Natural
Can any of the company-specific risk be diversified away by investing in both SP 500 and WisdomTree Natural 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 SP 500 and WisdomTree Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP 500 VIX and WisdomTree Natural Gas, you can compare the effects of market volatilities on SP 500 and WisdomTree Natural 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 SP 500 with a short position of WisdomTree Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and WisdomTree Natural.
Diversification Opportunities for SP 500 and WisdomTree Natural
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between VILX and WisdomTree is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and WisdomTree Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Natural Gas and SP 500 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 SP 500 VIX are associated (or correlated) with WisdomTree Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Natural Gas has no effect on the direction of SP 500 i.e., SP 500 and WisdomTree Natural go up and down completely randomly.
Pair Corralation between SP 500 and WisdomTree Natural
Assuming the 90 days trading horizon SP 500 VIX is expected to generate 1.0 times more return on investment than WisdomTree Natural. However, SP 500 is 1.0 times more volatile than WisdomTree Natural Gas. It trades about 0.03 of its potential returns per unit of risk. WisdomTree Natural Gas is currently generating about 0.02 per unit of risk. If you would invest 5,650 in SP 500 VIX on September 5, 2024 and sell it today you would earn a total of 155,559 from holding SP 500 VIX or generate 2753.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
SP 500 VIX vs. WisdomTree Natural Gas
Performance |
| Timeline |
| SP 500 VIX |
| WisdomTree Natural Gas |
SP 500 and WisdomTree Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SP 500 and WisdomTree Natural
The main advantage of trading using opposite SP 500 and WisdomTree Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, WisdomTree Natural 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 Natural will offset losses from the drop in WisdomTree Natural's long position.| SP 500 vs. GraniteShares 3x Short | SP 500 vs. WisdomTree Natural Gas | SP 500 vs. Leverage Shares 3x | SP 500 vs. WisdomTree Natural Gas |
| WisdomTree Natural vs. WisdomTree Natural Gas | WisdomTree Natural vs. Leverage Shares 2x | WisdomTree Natural vs. WisdomTree Silver 3x | WisdomTree Natural vs. Leverage Shares 2x |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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