Correlation Between Xtrackers and WisdomTree
Can any of the company-specific risk be diversified away by investing in both Xtrackers and WisdomTree 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 Xtrackers and WisdomTree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers SP 500 and WisdomTree SP 500, you can compare the effects of market volatilities on Xtrackers and WisdomTree 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 Xtrackers with a short position of WisdomTree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and WisdomTree.
Diversification Opportunities for Xtrackers and WisdomTree
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Xtrackers and WisdomTree is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers SP 500 and WisdomTree SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SP 500 and Xtrackers 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 Xtrackers SP 500 are associated (or correlated) with WisdomTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SP 500 has no effect on the direction of Xtrackers i.e., Xtrackers and WisdomTree go up and down completely randomly.
Pair Corralation between Xtrackers and WisdomTree
Assuming the 90 days trading horizon Xtrackers is expected to generate 1.41 times less return on investment than WisdomTree. But when comparing it to its historical volatility, Xtrackers SP 500 is 1.48 times less risky than WisdomTree. It trades about 0.11 of its potential returns per unit of risk. WisdomTree SP 500 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 11,104 in WisdomTree SP 500 on August 24, 2024 and sell it today you would earn a total of 625.00 from holding WisdomTree SP 500 or generate 5.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers SP 500 vs. WisdomTree SP 500
Performance |
| Timeline |
| Xtrackers SP 500 |
| WisdomTree SP 500 |
Xtrackers and WisdomTree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers and WisdomTree
The main advantage of trading using opposite Xtrackers and WisdomTree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers position performs unexpectedly, WisdomTree 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 will offset losses from the drop in WisdomTree's long position.| Xtrackers vs. Xtrackers MSCI | Xtrackers vs. Xtrackers FTSE 250 | Xtrackers vs. Xtrackers Ie Plc | Xtrackers vs. Xtrackers Russell 2000 |
| WisdomTree vs. Leverage Shares 3x | WisdomTree vs. WisdomTree SP 500 | WisdomTree vs. WisdomTree Silver 3x | WisdomTree vs. Leverage Shares 3x |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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