Correlation Between WisdomTree MidCap and Global X

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

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

Diversification Opportunities for WisdomTree MidCap and Global X

0.94

Correlation Coefficient

WisdomTree MidCap  Global X

Almost no diversification

The 3 months correlation between WisdomTree and Global is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree MidCap Dividend and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds and WisdomTree MidCap 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 MidCap Dividend are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of WisdomTree MidCap i.e., WisdomTree MidCap and Global X go up and down completely randomly.

Pair Corralation between WisdomTree MidCap and Global X

Considering the 90-day investment horizon WisdomTree MidCap Dividend is expected to under-perform the Global X. In addition to that, WisdomTree MidCap is 1.0 times more volatile than Global X Funds. It trades about -0.04 of its total potential returns per unit of risk. Global X Funds is currently generating about -0.02 per unit of volatility. If you would invest  3,121  in Global X Funds on December 29, 2024 and sell it today you would lose (49.00) from holding Global X Funds or give up 1.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

WisdomTree MidCap Dividend  vs.  Global X Funds

WisdomTree MidCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree MidCap Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, WisdomTree MidCap is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Global X Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Global X is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with WisdomTree MidCap and Global X

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

The idea behind WisdomTree MidCap Dividend and Global X Funds 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.