Correlation Between WisdomTree Grains and WisdomTree WTI

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

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

Diversification Opportunities for WisdomTree Grains and WisdomTree WTI

0.57

Correlation Coefficient

WisdomTree Grains  WisdomTree WTI

Very weak diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Grains and WisdomTree WTI Crude in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree WTI Crude and WisdomTree Grains 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 Grains are associated (or correlated) with WisdomTree WTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree WTI Crude has no effect on the direction of WisdomTree Grains i.e., WisdomTree Grains and WisdomTree WTI go up and down completely randomly.

Pair Corralation between WisdomTree Grains and WisdomTree WTI

Assuming the 90 days trading horizon WisdomTree Grains is expected to under-perform the WisdomTree WTI. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Grains is 2.71 times less risky than WisdomTree WTI. The etf trades about -0.03 of its potential returns per unit of risk. The WisdomTree WTI Crude is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,097  in WisdomTree WTI Crude on October 9, 2024 and sell it today you would earn a total of  126.00  from holding WisdomTree WTI Crude or generate 11.49% return on investment over 90 days.

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

WisdomTree Grains  vs.  WisdomTree WTI Crude

WisdomTree Grains

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Grains has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WisdomTree Grains is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree WTI Crude

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree WTI Crude are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, WisdomTree WTI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WisdomTree Grains and WisdomTree WTI

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

The idea behind WisdomTree Grains and WisdomTree WTI 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.