Correlation Between WisdomTree Efficient and FIRE Funds

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

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

Diversification Opportunities for WisdomTree Efficient and FIRE Funds

0.93

Correlation Coefficient

WisdomTree Efficient  FIRE Funds

Almost no diversification

The 3 months correlation between WisdomTree and FIRE is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Efficient Gold and FIRE Funds Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRE Funds Income and WisdomTree Efficient 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 Efficient Gold are associated (or correlated) with FIRE Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRE Funds Income has no effect on the direction of WisdomTree Efficient i.e., WisdomTree Efficient and FIRE Funds go up and down completely randomly.

Pair Corralation between WisdomTree Efficient and FIRE Funds

Considering the 90-day investment horizon WisdomTree Efficient Gold is expected to generate 4.49 times more return on investment than FIRE Funds. However, WisdomTree Efficient is 4.49 times more volatile than FIRE Funds Income. It trades about 0.1 of its potential returns per unit of risk. FIRE Funds Income is currently generating about 0.09 per unit of risk. If you would invest  3,737  in WisdomTree Efficient Gold on December 21, 2024 and sell it today you would earn a total of  259.00  from holding WisdomTree Efficient Gold or generate 6.93% return on investment over 90 days.

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

WisdomTree Efficient Gold  vs.  FIRE Funds Income

WisdomTree Efficient Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Efficient Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, WisdomTree Efficient may actually be approaching a critical reversion point that can send shares even higher in April 2025.

FIRE Funds Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIRE Funds Income are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, FIRE Funds is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with WisdomTree Efficient and FIRE Funds

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

The idea behind WisdomTree Efficient Gold and FIRE Funds Income 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.