Correlation Between WisdomTree Efficient and Northern Lights

Can any of the company-specific risk be diversified away by investing in both WisdomTree Efficient and Northern Lights 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 Northern Lights 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 Northern Lights, you can compare the effects of market volatilities on WisdomTree Efficient and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Efficient and Northern Lights.

Diversification Opportunities for WisdomTree Efficient and Northern Lights

0.0

Correlation Coefficient

WisdomTree Efficient  Northern Lights

Pay attention - limited upside

The 3 months correlation between WisdomTree and Northern is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Efficient Gold and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of WisdomTree Efficient i.e., WisdomTree Efficient and Northern Lights go up and down completely randomly.

Pair Corralation between WisdomTree Efficient and Northern Lights

If you would invest  3,737  in WisdomTree Efficient Gold on December 23, 2024 and sell it today you would earn a total of  282.00  from holding WisdomTree Efficient Gold or generate 7.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

WisdomTree Efficient Gold  vs.  Northern Lights

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 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, WisdomTree Efficient may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Northern Lights

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Lights has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Northern Lights is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree Efficient and Northern Lights

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

The idea behind WisdomTree Efficient Gold and Northern Lights 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.