Correlation Between Global X and WisdomTree Dynamic

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

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

Diversification Opportunities for Global X and WisdomTree Dynamic

0.81

Correlation Coefficient

Global X  WisdomTree Dynamic

Very poor diversification

The 3 months correlation between Global and WisdomTree is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Global X Alternative and WisdomTree Dynamic Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Dynamic and Global X 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 Global X Alternative are associated (or correlated) with WisdomTree Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Dynamic has no effect on the direction of Global X i.e., Global X and WisdomTree Dynamic go up and down completely randomly.

Pair Corralation between Global X and WisdomTree Dynamic

Given the investment horizon of 90 days Global X is expected to generate 2.49 times less return on investment than WisdomTree Dynamic. But when comparing it to its historical volatility, Global X Alternative is 1.2 times less risky than WisdomTree Dynamic. It trades about 0.11 of its potential returns per unit of risk. WisdomTree Dynamic Currency is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,433  in WisdomTree Dynamic Currency on December 27, 2024 and sell it today you would earn a total of  294.00  from holding WisdomTree Dynamic Currency or generate 8.56% return on investment over 90 days.

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

Global X Alternative  vs.  WisdomTree Dynamic Currency

Global X Alternative

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Alternative are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Global X is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree Dynamic

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Dynamic Currency are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, WisdomTree Dynamic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global X and WisdomTree Dynamic

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

The idea behind Global X Alternative and WisdomTree Dynamic Currency 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 Transaction History module to view history of all your transactions and understand their impact on performance.