Correlation Between SPDR SP and WisdomTree Dynamic

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

By analyzing existing cross correlation between SPDR SP International and WisdomTree Dynamic Currency, you can compare the effects of market volatilities on SPDR SP and WisdomTree Dynamic 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 SPDR SP with a short position of WisdomTree Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and WisdomTree Dynamic.

Diversification Opportunities for SPDR SP and WisdomTree Dynamic

0.63

Correlation Coefficient

SPDR SP  WisdomTree Dynamic

Poor diversification

The 3 months correlation between SPDR and WisdomTree is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP International and WisdomTree Dynamic Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Dynamic and SPDR SP 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 SPDR SP International are associated (or correlated) with WisdomTree Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Dynamic has no effect on the direction of SPDR SP i.e., SPDR SP and WisdomTree Dynamic go up and down completely randomly.

Pair Corralation between SPDR SP and WisdomTree Dynamic

Considering the 90-day investment horizon SPDR SP is expected to generate 1.82 times less return on investment than WisdomTree Dynamic. But when comparing it to its historical volatility, SPDR SP International is 1.19 times less risky than WisdomTree Dynamic. It trades about 0.05 of its potential returns per unit of risk. WisdomTree Dynamic Currency is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,895  in WisdomTree Dynamic Currency on October 5, 2024 and sell it today you would earn a total of  597.00  from holding WisdomTree Dynamic Currency or generate 20.62% return on investment over 90 days.

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

SPDR SP International  vs.  WisdomTree Dynamic Currency

SPDR SP International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Dynamic Currency has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, WisdomTree Dynamic is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and WisdomTree Dynamic

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

The idea behind SPDR SP International and WisdomTree Dynamic Currency 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.