Correlation Between WisdomTree Interest and Invesco Multi

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

By analyzing existing cross correlation between WisdomTree Interest Rate and Invesco Multi Strategy Alternative, you can compare the effects of market volatilities on WisdomTree Interest and Invesco Multi 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 Interest with a short position of Invesco Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Interest and Invesco Multi.

Diversification Opportunities for WisdomTree Interest and Invesco Multi

0.8

Correlation Coefficient

WisdomTree Interest  Invesco Multi

Very poor diversification

The 3 months correlation between WisdomTree and Invesco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Interest Rate and Invesco Multi Strategy Alterna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Multi Strategy and WisdomTree Interest 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 Interest Rate are associated (or correlated) with Invesco Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Multi Strategy has no effect on the direction of WisdomTree Interest i.e., WisdomTree Interest and Invesco Multi go up and down completely randomly.

Pair Corralation between WisdomTree Interest and Invesco Multi

Given the investment horizon of 90 days WisdomTree Interest Rate is expected to generate 0.82 times more return on investment than Invesco Multi. However, WisdomTree Interest Rate is 1.22 times less risky than Invesco Multi. It trades about 0.12 of its potential returns per unit of risk. Invesco Multi Strategy Alternative is currently generating about 0.09 per unit of risk. If you would invest  2,032  in WisdomTree Interest Rate on September 30, 2024 and sell it today you would earn a total of  222.00  from holding WisdomTree Interest Rate or generate 10.93% return on investment over 90 days.

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

WisdomTree Interest Rate  vs.  Invesco Multi Strategy Alterna

WisdomTree Interest Rate

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Interest Rate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, WisdomTree Interest is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Multi Strategy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Multi Strategy Alternative are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Invesco Multi is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WisdomTree Interest and Invesco Multi

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

The idea behind WisdomTree Interest Rate and Invesco Multi Strategy Alternative 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.