Correlation Between WisdomTree Efficient and X Square

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

Diversification Opportunities for WisdomTree Efficient and X Square

0.47

Correlation Coefficient

WisdomTree Efficient  X Square

Very weak diversification

The 3 months correlation between WisdomTree and SQBIX is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Efficient Gold and X Square Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Square Balanced 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 X Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Square Balanced has no effect on the direction of WisdomTree Efficient i.e., WisdomTree Efficient and X Square go up and down completely randomly.

Pair Corralation between WisdomTree Efficient and X Square

Considering the 90-day investment horizon WisdomTree Efficient Gold is expected to generate 1.77 times more return on investment than X Square. However, WisdomTree Efficient is 1.77 times more volatile than X Square Balanced. It trades about 0.12 of its potential returns per unit of risk. X Square Balanced is currently generating about -0.04 per unit of risk. If you would invest  3,703  in WisdomTree Efficient Gold on December 30, 2024 and sell it today you would earn a total of  330.00  from holding WisdomTree Efficient Gold or generate 8.91% return on investment over 90 days.

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

WisdomTree Efficient Gold  vs.  X Square Balanced

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 9 (%) 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.

X Square Balanced

Risk-Adjusted Performance

Very Weak

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

Pair Trading with WisdomTree Efficient and X Square

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

The idea behind WisdomTree Efficient Gold and X Square Balanced 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.