Correlation Between Wilshire 5000 and Wilshire Income
Can any of the company-specific risk be diversified away by investing in both Wilshire 5000 and Wilshire Income 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 Income 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 Income Opport, you can compare the effects of market volatilities on Wilshire 5000 and Wilshire Income 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 Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilshire 5000 and Wilshire Income.
Diversification Opportunities for Wilshire 5000 and Wilshire Income
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Wilshire and Wilshire is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wilshire 5000 Index and Wilshire Income Opport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire Income Opport 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 Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire Income Opport has no effect on the direction of Wilshire 5000 i.e., Wilshire 5000 and Wilshire Income go up and down completely randomly.
Pair Corralation between Wilshire 5000 and Wilshire Income
Assuming the 90 days horizon Wilshire 5000 Index is expected to generate 3.72 times more return on investment than Wilshire Income. However, Wilshire 5000 is 3.72 times more volatile than Wilshire Income Opport. It trades about 0.14 of its potential returns per unit of risk. Wilshire Income Opport is currently generating about 0.16 per unit of risk. If you would invest 2,992 in Wilshire 5000 Index on August 28, 2024 and sell it today you would earn a total of 464.00 from holding Wilshire 5000 Index or generate 15.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wilshire 5000 Index vs. Wilshire Income Opport
Performance |
| Timeline |
| Wilshire 5000 Index |
| Wilshire Income Opport |
Wilshire 5000 and Wilshire Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilshire 5000 and Wilshire Income
The main advantage of trading using opposite Wilshire 5000 and Wilshire Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilshire 5000 position performs unexpectedly, Wilshire Income 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 Income will offset losses from the drop in Wilshire Income's long position.| Wilshire 5000 vs. Schwab Total Stock | Wilshire 5000 vs. Vanguard Russell 3000 | Wilshire 5000 vs. iShares Russell 3000 | Wilshire 5000 vs. Large Pany Value |
| Wilshire Income vs. Small Pany Growth | Wilshire Income vs. Small Pany Value | Wilshire Income vs. Wilshire 5000 Index | Wilshire Income vs. Wilshire Income Opport |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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