Correlation Between IShares GNMA and WisdomTree Bianco

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

By analyzing existing cross correlation between iShares GNMA Bond and WisdomTree Bianco Total, you can compare the effects of market volatilities on IShares GNMA and WisdomTree Bianco 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 IShares GNMA with a short position of WisdomTree Bianco. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares GNMA and WisdomTree Bianco.

Diversification Opportunities for IShares GNMA and WisdomTree Bianco

0.99

Correlation Coefficient

IShares GNMA  WisdomTree Bianco

No risk reduction

The 3 months correlation between IShares and WisdomTree is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares GNMA Bond and WisdomTree Bianco Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Bianco Total and IShares GNMA 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 iShares GNMA Bond are associated (or correlated) with WisdomTree Bianco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Bianco Total has no effect on the direction of IShares GNMA i.e., IShares GNMA and WisdomTree Bianco go up and down completely randomly.

Pair Corralation between IShares GNMA and WisdomTree Bianco

Given the investment horizon of 90 days iShares GNMA Bond is expected to generate 1.18 times more return on investment than WisdomTree Bianco. However, IShares GNMA is 1.18 times more volatile than WisdomTree Bianco Total. It trades about 0.13 of its potential returns per unit of risk. WisdomTree Bianco Total is currently generating about 0.12 per unit of risk. If you would invest  4,264  in iShares GNMA Bond on December 30, 2024 and sell it today you would earn a total of  119.00  from holding iShares GNMA Bond or generate 2.79% return on investment over 90 days.

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

iShares GNMA Bond  vs.  WisdomTree Bianco Total

iShares GNMA Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares GNMA Bond are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, IShares GNMA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree Bianco Total

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Bianco Total are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, WisdomTree Bianco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares GNMA and WisdomTree Bianco

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

The idea behind iShares GNMA Bond and WisdomTree Bianco Total 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.