Correlation Between Aptus Drawdown and WisdomTree Target

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

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

Diversification Opportunities for Aptus Drawdown and WisdomTree Target

0.9

Correlation Coefficient

Aptus Drawdown  WisdomTree Target

Almost no diversification

The 3 months correlation between Aptus and WisdomTree is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Aptus Drawdown Managed and WisdomTree Target Range in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Target Range and Aptus Drawdown 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 Aptus Drawdown Managed are associated (or correlated) with WisdomTree Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Target Range has no effect on the direction of Aptus Drawdown i.e., Aptus Drawdown and WisdomTree Target go up and down completely randomly.

Pair Corralation between Aptus Drawdown and WisdomTree Target

Given the investment horizon of 90 days Aptus Drawdown Managed is expected to under-perform the WisdomTree Target. In addition to that, Aptus Drawdown is 1.33 times more volatile than WisdomTree Target Range. It trades about -0.11 of its total potential returns per unit of risk. WisdomTree Target Range is currently generating about -0.08 per unit of volatility. If you would invest  2,426  in WisdomTree Target Range on December 26, 2024 and sell it today you would lose (82.00) from holding WisdomTree Target Range or give up 3.38% of portfolio value over 90 days.

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

Aptus Drawdown Managed  vs.  WisdomTree Target Range

Aptus Drawdown Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aptus Drawdown Managed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

WisdomTree Target Range

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Target Range has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, WisdomTree Target is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Aptus Drawdown and WisdomTree Target

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

The idea behind Aptus Drawdown Managed and WisdomTree Target Range 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 Anywhere module to track or share privately all of your investments from the convenience of any device.