Correlation Between Avantis Real and WisdomTree New

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

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

Diversification Opportunities for Avantis Real and WisdomTree New

0.87

Correlation Coefficient

Avantis Real  WisdomTree New

Very poor diversification

The 3 months correlation between Avantis and WisdomTree is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Real Estate and WisdomTree New Economy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree New Economy and Avantis Real 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 Avantis Real Estate are associated (or correlated) with WisdomTree New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree New Economy has no effect on the direction of Avantis Real i.e., Avantis Real and WisdomTree New go up and down completely randomly.

Pair Corralation between Avantis Real and WisdomTree New

Given the investment horizon of 90 days Avantis Real Estate is expected to generate 0.99 times more return on investment than WisdomTree New. However, Avantis Real Estate is 1.01 times less risky than WisdomTree New. It trades about -0.02 of its potential returns per unit of risk. WisdomTree New Economy is currently generating about -0.05 per unit of risk. If you would invest  4,444  in Avantis Real Estate on December 5, 2024 and sell it today you would lose (55.00) from holding Avantis Real Estate or give up 1.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Avantis Real Estate  vs.  WisdomTree New Economy

Avantis Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avantis Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Avantis Real is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree New Economy

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree New Economy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, WisdomTree New is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Avantis Real and WisdomTree New

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

The idea behind Avantis Real Estate and WisdomTree New Economy 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.