Correlation Between EQT AB and WisdomTree Investments

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

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

Diversification Opportunities for EQT AB and WisdomTree Investments

0.23

Correlation Coefficient

EQT AB  WisdomTree Investments

Modest diversification

The 3 months correlation between EQT and WisdomTree is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding EQT AB and WisdomTree Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Investments and EQT AB 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 EQT AB are associated (or correlated) with WisdomTree Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Investments has no effect on the direction of EQT AB i.e., EQT AB and WisdomTree Investments go up and down completely randomly.

Pair Corralation between EQT AB and WisdomTree Investments

Assuming the 90 days horizon EQT AB is expected to generate 1.23 times more return on investment than WisdomTree Investments. However, EQT AB is 1.23 times more volatile than WisdomTree Investments. It trades about 0.06 of its potential returns per unit of risk. WisdomTree Investments is currently generating about -0.14 per unit of risk. If you would invest  2,685  in EQT AB on December 30, 2024 and sell it today you would earn a total of  199.00  from holding EQT AB or generate 7.41% return on investment over 90 days.

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

EQT AB  vs.  WisdomTree Investments

EQT AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EQT AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, EQT AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

WisdomTree Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with EQT AB and WisdomTree Investments

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

The idea behind EQT AB and WisdomTree Investments 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.