Correlation Between WisdomTree Natural and Invesco MSCI

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

By analyzing existing cross correlation between WisdomTree Natural Gas and Invesco MSCI World, you can compare the effects of market volatilities on WisdomTree Natural and Invesco MSCI 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 Natural with a short position of Invesco MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Natural and Invesco MSCI.

Diversification Opportunities for WisdomTree Natural and Invesco MSCI

-0.51

Correlation Coefficient

WisdomTree Natural  Invesco MSCI

Excellent diversification

The 3 months correlation between WisdomTree and Invesco is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and Invesco MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco MSCI World and WisdomTree Natural 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 Natural Gas are associated (or correlated) with Invesco MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco MSCI World has no effect on the direction of WisdomTree Natural i.e., WisdomTree Natural and Invesco MSCI go up and down completely randomly.

Pair Corralation between WisdomTree Natural and Invesco MSCI

Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to under-perform the Invesco MSCI. In addition to that, WisdomTree Natural is 3.92 times more volatile than Invesco MSCI World. It trades about -0.05 of its total potential returns per unit of risk. Invesco MSCI World is currently generating about 0.07 per unit of volatility. If you would invest  406.00  in Invesco MSCI World on October 11, 2024 and sell it today you would earn a total of  129.00  from holding Invesco MSCI World or generate 31.77% return on investment over 90 days.

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

WisdomTree Natural Gas  vs.  Invesco MSCI World

WisdomTree Natural Gas

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Natural Gas are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Natural unveiled solid returns over the last few months and may actually be approaching a breakup point.

Invesco MSCI World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco MSCI World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Invesco MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WisdomTree Natural and Invesco MSCI

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

The idea behind WisdomTree Natural Gas and Invesco MSCI World 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.