Correlation Between WisdomTree Natural and IShares JP

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

Diversification Opportunities for WisdomTree Natural and IShares JP

0.66

Correlation Coefficient

WisdomTree Natural  IShares JP

Poor diversification

The 3 months correlation between WisdomTree and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan 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 IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of WisdomTree Natural i.e., WisdomTree Natural and IShares JP go up and down completely randomly.

Pair Corralation between WisdomTree Natural and IShares JP

Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to generate 8.78 times more return on investment than IShares JP. However, WisdomTree Natural is 8.78 times more volatile than iShares JP Morgan. It trades about 0.03 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.01 per unit of risk. If you would invest  53,615  in WisdomTree Natural Gas on September 12, 2024 and sell it today you would earn a total of  1,550  from holding WisdomTree Natural Gas or generate 2.89% return on investment over 90 days.

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

WisdomTree Natural Gas  vs.  iShares JP Morgan

WisdomTree Natural Gas

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Natural Gas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WisdomTree Natural is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares JP Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares JP 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 IShares JP

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

The idea behind WisdomTree Natural Gas and iShares JP Morgan 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.