Correlation Between IShares GSCI and WisdomTree Continuous

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

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

Diversification Opportunities for IShares GSCI and WisdomTree Continuous

0.85

Correlation Coefficient

IShares GSCI  WisdomTree Continuous

Very poor diversification

The 3 months correlation between IShares and WisdomTree is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares GSCI Commodity and WisdomTree Continuous Commodit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Continuous and IShares GSCI 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 iShares GSCI Commodity are associated (or correlated) with WisdomTree Continuous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Continuous has no effect on the direction of IShares GSCI i.e., IShares GSCI and WisdomTree Continuous go up and down completely randomly.

Pair Corralation between IShares GSCI and WisdomTree Continuous

Given the investment horizon of 90 days IShares GSCI is expected to generate 1.02 times less return on investment than WisdomTree Continuous. In addition to that, IShares GSCI is 1.17 times more volatile than WisdomTree Continuous Commodity. It trades about 0.09 of its total potential returns per unit of risk. WisdomTree Continuous Commodity is currently generating about 0.1 per unit of volatility. If you would invest  1,877  in WisdomTree Continuous Commodity on December 30, 2024 and sell it today you would earn a total of  74.00  from holding WisdomTree Continuous Commodity or generate 3.94% return on investment over 90 days.

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

iShares GSCI Commodity  vs.  WisdomTree Continuous Commodit

iShares GSCI Commodity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares GSCI Commodity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, IShares GSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Continuous

Risk-Adjusted Performance

OK

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

Pair Trading with IShares GSCI and WisdomTree Continuous

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

The idea behind iShares GSCI Commodity and WisdomTree Continuous Commodity 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.