Correlation Between WisdomTree Brent and WisdomTree Silver

Can any of the company-specific risk be diversified away by investing in both WisdomTree Brent and WisdomTree Silver 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 Brent and WisdomTree Silver into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WisdomTree Brent Crude and WisdomTree Silver 3x, you can compare the effects of market volatilities on WisdomTree Brent and WisdomTree Silver 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 Brent with a short position of WisdomTree Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Brent and WisdomTree Silver.

Diversification Opportunities for WisdomTree Brent and WisdomTree Silver

0.18

Correlation Coefficient

WisdomTree Brent  WisdomTree Silver

Average diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Brent Crude and WisdomTree Silver 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Silver and WisdomTree Brent 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 Brent Crude are associated (or correlated) with WisdomTree Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Silver has no effect on the direction of WisdomTree Brent i.e., WisdomTree Brent and WisdomTree Silver go up and down completely randomly.

Pair Corralation between WisdomTree Brent and WisdomTree Silver

Assuming the 90 days trading horizon WisdomTree Brent is expected to generate 2.0 times less return on investment than WisdomTree Silver. In addition to that, WisdomTree Brent is 1.03 times more volatile than WisdomTree Silver 3x. It trades about 0.03 of its total potential returns per unit of risk. WisdomTree Silver 3x is currently generating about 0.06 per unit of volatility. If you would invest  472,800  in WisdomTree Silver 3x on September 13, 2024 and sell it today you would earn a total of  61,500  from holding WisdomTree Silver 3x or generate 13.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

WisdomTree Brent Crude  vs.  WisdomTree Silver 3x

WisdomTree Brent Crude

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Brent Crude are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Brent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WisdomTree Silver

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Silver 3x are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Silver unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Brent and WisdomTree Silver

The main advantage of trading using opposite WisdomTree Brent and WisdomTree Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Brent position performs unexpectedly, WisdomTree Silver 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 Silver will offset losses from the drop in WisdomTree Silver's long position.

The idea behind WisdomTree Brent Crude and WisdomTree Silver 3x 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.