Correlation Between WisdomTree Earnings and NXG NextGen

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

By analyzing existing cross correlation between WisdomTree Earnings 500 and NXG NextGen Infrastructure, you can compare the effects of market volatilities on WisdomTree Earnings and NXG NextGen 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 Earnings with a short position of NXG NextGen. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Earnings and NXG NextGen.

Diversification Opportunities for WisdomTree Earnings and NXG NextGen

0.73

Correlation Coefficient

WisdomTree Earnings  NXG NextGen

Poor diversification

The 3 months correlation between WisdomTree and NXG is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Earnings 500 and NXG NextGen Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXG NextGen Infrastr and WisdomTree Earnings 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 Earnings 500 are associated (or correlated) with NXG NextGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXG NextGen Infrastr has no effect on the direction of WisdomTree Earnings i.e., WisdomTree Earnings and NXG NextGen go up and down completely randomly.

Pair Corralation between WisdomTree Earnings and NXG NextGen

Considering the 90-day investment horizon WisdomTree Earnings 500 is expected to under-perform the NXG NextGen. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Earnings 500 is 2.81 times less risky than NXG NextGen. The etf trades about -0.16 of its potential returns per unit of risk. The NXG NextGen Infrastructure is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,552  in NXG NextGen Infrastructure on October 12, 2024 and sell it today you would earn a total of  18.00  from holding NXG NextGen Infrastructure or generate 0.4% return on investment over 90 days.

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

WisdomTree Earnings 500  vs.  NXG NextGen Infrastructure

WisdomTree Earnings 500

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Earnings 500 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WisdomTree Earnings is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

NXG NextGen Infrastr

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, NXG NextGen may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WisdomTree Earnings and NXG NextGen

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

The idea behind WisdomTree Earnings 500 and NXG NextGen Infrastructure 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.