Correlation Between WisdomTree LargeCap and Vanguard High

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

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

Diversification Opportunities for WisdomTree LargeCap and Vanguard High

0.99

Correlation Coefficient

WisdomTree LargeCap  Vanguard High

No risk reduction

The 3 months correlation between WisdomTree and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree LargeCap Dividend and Vanguard High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Dividend and WisdomTree LargeCap 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 LargeCap Dividend are associated (or correlated) with Vanguard High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Dividend has no effect on the direction of WisdomTree LargeCap i.e., WisdomTree LargeCap and Vanguard High go up and down completely randomly.

Pair Corralation between WisdomTree LargeCap and Vanguard High

Considering the 90-day investment horizon WisdomTree LargeCap Dividend is expected to generate 0.92 times more return on investment than Vanguard High. However, WisdomTree LargeCap Dividend is 1.09 times less risky than Vanguard High. It trades about 0.09 of its potential returns per unit of risk. Vanguard High Dividend is currently generating about 0.07 per unit of risk. If you would invest  6,043  in WisdomTree LargeCap Dividend on September 16, 2024 and sell it today you would earn a total of  1,961  from holding WisdomTree LargeCap Dividend or generate 32.45% return on investment over 90 days.

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

WisdomTree LargeCap Dividend  vs.  Vanguard High Dividend

WisdomTree LargeCap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree LargeCap Dividend are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, WisdomTree LargeCap is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vanguard High Dividend

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard High Dividend are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard High is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree LargeCap and Vanguard High

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

The idea behind WisdomTree LargeCap Dividend and Vanguard High Dividend 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.