Correlation Between WisdomTree Managed and Freedom 100
Can any of the company-specific risk be diversified away by investing in both WisdomTree Managed and Freedom 100 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 Managed and Freedom 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Managed Futures and Freedom 100 Emerging, you can compare the effects of market volatilities on WisdomTree Managed and Freedom 100 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 Managed with a short position of Freedom 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Managed and Freedom 100.
Diversification Opportunities for WisdomTree Managed and Freedom 100
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WisdomTree and Freedom is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Managed Futures and Freedom 100 Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom 100 Emerging and WisdomTree Managed 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 Managed Futures are associated (or correlated) with Freedom 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom 100 Emerging has no effect on the direction of WisdomTree Managed i.e., WisdomTree Managed and Freedom 100 go up and down completely randomly.
Pair Corralation between WisdomTree Managed and Freedom 100
Given the investment horizon of 90 days WisdomTree Managed Futures is expected to generate 1.35 times more return on investment than Freedom 100. However, WisdomTree Managed is 1.35 times more volatile than Freedom 100 Emerging. It trades about 0.11 of its potential returns per unit of risk. Freedom 100 Emerging is currently generating about -0.23 per unit of risk. If you would invest 3,466 in WisdomTree Managed Futures on August 26, 2024 and sell it today you would earn a total of 109.00 from holding WisdomTree Managed Futures or generate 3.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Managed Futures vs. Freedom 100 Emerging
Performance |
| Timeline |
| WisdomTree Managed |
| Freedom 100 Emerging |
WisdomTree Managed and Freedom 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Managed and Freedom 100
The main advantage of trading using opposite WisdomTree Managed and Freedom 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Managed position performs unexpectedly, Freedom 100 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 Freedom 100 will offset losses from the drop in Freedom 100's long position.The idea behind WisdomTree Managed Futures and Freedom 100 Emerging pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Freedom 100 vs. Invesco PureBeta MSCI | Freedom 100 vs. Aquagold International | Freedom 100 vs. Morningstar Unconstrained Allocation | Freedom 100 vs. High Yield Municipal Fund |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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