Correlation Between WisdomTree Gold and WisdomTree Brent

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

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

Diversification Opportunities for WisdomTree Gold and WisdomTree Brent

-0.32

Correlation Coefficient

WisdomTree Gold  WisdomTree Brent

Very good diversification

The 3 months correlation between WisdomTree and WisdomTree is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Gold 3x and WisdomTree Brent Crude in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Brent Crude and WisdomTree Gold 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 Gold 3x are associated (or correlated) with WisdomTree Brent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Brent Crude has no effect on the direction of WisdomTree Gold i.e., WisdomTree Gold and WisdomTree Brent go up and down completely randomly.

Pair Corralation between WisdomTree Gold and WisdomTree Brent

Assuming the 90 days trading horizon WisdomTree Gold 3x is expected to under-perform the WisdomTree Brent. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Gold 3x is 1.23 times less risky than WisdomTree Brent. The etf trades about -0.11 of its potential returns per unit of risk. The WisdomTree Brent Crude is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,838  in WisdomTree Brent Crude on December 3, 2024 and sell it today you would lose (19.00) from holding WisdomTree Brent Crude or give up 0.67% of portfolio value over 90 days.

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

WisdomTree Gold 3x  vs.  WisdomTree Brent Crude

WisdomTree Gold 3x

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Gold 3x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

WisdomTree Brent Crude

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Brent Crude are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WisdomTree Brent is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WisdomTree Gold and WisdomTree Brent

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

The idea behind WisdomTree Gold 3x and WisdomTree Brent Crude 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.