Correlation Between WisdomTree WTI and WisdomTree Gold

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

By analyzing existing cross correlation between WisdomTree WTI Crude and WisdomTree Gold 3x, you can compare the effects of market volatilities on WisdomTree WTI and WisdomTree Gold 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 WTI with a short position of WisdomTree Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree WTI and WisdomTree Gold.

Diversification Opportunities for WisdomTree WTI and WisdomTree Gold

-0.23

Correlation Coefficient

WisdomTree WTI  WisdomTree Gold

Very good diversification

The 3 months correlation between WisdomTree and WisdomTree is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree WTI Crude and WisdomTree Gold 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Gold 3x and WisdomTree WTI 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 WTI Crude are associated (or correlated) with WisdomTree Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Gold 3x has no effect on the direction of WisdomTree WTI i.e., WisdomTree WTI and WisdomTree Gold go up and down completely randomly.

Pair Corralation between WisdomTree WTI and WisdomTree Gold

Assuming the 90 days trading horizon WisdomTree WTI Crude is expected to generate 1.41 times more return on investment than WisdomTree Gold. However, WisdomTree WTI is 1.41 times more volatile than WisdomTree Gold 3x. It trades about 0.02 of its potential returns per unit of risk. WisdomTree Gold 3x is currently generating about -0.08 per unit of risk. If you would invest  1,049  in WisdomTree WTI Crude on September 12, 2024 and sell it today you would earn a total of  12.00  from holding WisdomTree WTI Crude or generate 1.14% return on investment over 90 days.

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

WisdomTree WTI Crude  vs.  WisdomTree Gold 3x

WisdomTree WTI Crude

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree WTI Crude are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WisdomTree WTI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Gold 3x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Gold 3x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with WisdomTree WTI and WisdomTree Gold

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

The idea behind WisdomTree WTI Crude and WisdomTree Gold 3x 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..