Correlation Between IShares SP and WisdomTree High

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

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

Diversification Opportunities for IShares SP and WisdomTree High

0.29

Correlation Coefficient

IShares SP  WisdomTree High

Modest diversification

The 3 months correlation between IShares and WisdomTree is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and WisdomTree High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree High Dividend and IShares SP 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 SP 500 are associated (or correlated) with WisdomTree High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree High Dividend has no effect on the direction of IShares SP i.e., IShares SP and WisdomTree High go up and down completely randomly.

Pair Corralation between IShares SP and WisdomTree High

Considering the 90-day investment horizon iShares SP 500 is expected to under-perform the WisdomTree High. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP 500 is 1.0 times less risky than WisdomTree High. The etf trades about -0.01 of its potential returns per unit of risk. The WisdomTree High Dividend is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9,226  in WisdomTree High Dividend on December 28, 2024 and sell it today you would earn a total of  567.00  from holding WisdomTree High Dividend or generate 6.15% return on investment over 90 days.

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

iShares SP 500  vs.  WisdomTree High Dividend

iShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree High Dividend

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree High Dividend are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical indicators, WisdomTree High may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares SP and WisdomTree High

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

The idea behind iShares SP 500 and WisdomTree High Dividend 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.