Correlation Between Wilshire 5000 and Wilshire Large
Can any of the company-specific risk be diversified away by investing in both Wilshire 5000 and Wilshire Large 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 Wilshire 5000 and Wilshire Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wilshire 5000 Index and Wilshire Large, you can compare the effects of market volatilities on Wilshire 5000 and Wilshire Large 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 Wilshire 5000 with a short position of Wilshire Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilshire 5000 and Wilshire Large.
Diversification Opportunities for Wilshire 5000 and Wilshire Large
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wilshire and Wilshire is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Wilshire 5000 Index and Wilshire Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire Large and Wilshire 5000 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 Wilshire 5000 Index are associated (or correlated) with Wilshire Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire Large has no effect on the direction of Wilshire 5000 i.e., Wilshire 5000 and Wilshire Large go up and down completely randomly.
Pair Corralation between Wilshire 5000 and Wilshire Large
Assuming the 90 days horizon Wilshire 5000 Index is expected to generate 0.46 times more return on investment than Wilshire Large. However, Wilshire 5000 Index is 2.15 times less risky than Wilshire Large. It trades about 0.07 of its potential returns per unit of risk. Wilshire Large is currently generating about 0.0 per unit of risk. If you would invest 3,297 in Wilshire 5000 Index on October 26, 2024 and sell it today you would earn a total of 119.00 from holding Wilshire 5000 Index or generate 3.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Wilshire 5000 Index vs. Wilshire Large
Performance |
| Timeline |
| Wilshire 5000 Index |
| Wilshire Large |
Wilshire 5000 and Wilshire Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilshire 5000 and Wilshire Large
The main advantage of trading using opposite Wilshire 5000 and Wilshire Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilshire 5000 position performs unexpectedly, Wilshire Large 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 Wilshire Large will offset losses from the drop in Wilshire Large's long position.| Wilshire 5000 vs. Calvert Moderate Allocation | Wilshire 5000 vs. College Retirement Equities | Wilshire 5000 vs. Voya Retirement Moderate | Wilshire 5000 vs. Franklin Lifesmart Retirement |
| Wilshire Large vs. Large Pany Value | Wilshire Large vs. Small Pany Growth | Wilshire Large vs. Small Pany Value | Wilshire Large vs. Value Line Premier |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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