Correlation Between WisdomTree Silver and Invesco FTSE

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

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

Diversification Opportunities for WisdomTree Silver and Invesco FTSE

0.5

Correlation Coefficient

WisdomTree Silver  Invesco FTSE

Very weak diversification

The 3 months correlation between WisdomTree and Invesco is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Silver 3x and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI and WisdomTree Silver 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 Silver 3x are associated (or correlated) with Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of WisdomTree Silver i.e., WisdomTree Silver and Invesco FTSE go up and down completely randomly.

Pair Corralation between WisdomTree Silver and Invesco FTSE

Assuming the 90 days trading horizon WisdomTree Silver 3x is expected to generate 5.95 times more return on investment than Invesco FTSE. However, WisdomTree Silver is 5.95 times more volatile than Invesco FTSE RAFI. It trades about 0.11 of its potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.08 per unit of risk. If you would invest  399,900  in WisdomTree Silver 3x on December 25, 2024 and sell it today you would earn a total of  107,150  from holding WisdomTree Silver 3x or generate 26.79% return on investment over 90 days.

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

WisdomTree Silver 3x  vs.  Invesco FTSE RAFI

WisdomTree Silver

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Silver 3x are ranked lower than 8 (%) 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.

Invesco FTSE RAFI

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE RAFI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco FTSE 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 Silver and Invesco FTSE

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

The idea behind WisdomTree Silver 3x and Invesco FTSE RAFI 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.