Correlation Between Vanguard Total and Wisdom Tree

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

By analyzing existing cross correlation between Vanguard Total Bond and Wisdom Tree Bitcoin, you can compare the effects of market volatilities on Vanguard Total and Wisdom Tree 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 Vanguard Total with a short position of Wisdom Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Wisdom Tree.

Diversification Opportunities for Vanguard Total and Wisdom Tree

-0.71

Correlation Coefficient

Vanguard Total  Wisdom Tree

Pay attention - limited upside

The 3 months correlation between Vanguard and Wisdom is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Wisdom Tree Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wisdom Tree Bitcoin and Vanguard Total 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 Vanguard Total Bond are associated (or correlated) with Wisdom Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wisdom Tree Bitcoin has no effect on the direction of Vanguard Total i.e., Vanguard Total and Wisdom Tree go up and down completely randomly.

Pair Corralation between Vanguard Total and Wisdom Tree

Considering the 90-day investment horizon Vanguard Total Bond is expected to under-perform the Wisdom Tree. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total Bond is 10.87 times less risky than Wisdom Tree. The etf trades about -0.03 of its potential returns per unit of risk. The Wisdom Tree Bitcoin is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  6,154  in Wisdom Tree Bitcoin on September 2, 2024 and sell it today you would earn a total of  4,149  from holding Wisdom Tree Bitcoin or generate 67.42% return on investment over 90 days.

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

Vanguard Total Bond  vs.  Wisdom Tree Bitcoin

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wisdom Tree Bitcoin

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wisdom Tree Bitcoin are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, Wisdom Tree showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Total and Wisdom Tree

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

The idea behind Vanguard Total Bond and Wisdom Tree Bitcoin 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.