Correlation Between WisdomTree WTI and WisdomTree

Can any of the company-specific risk be diversified away by investing in both WisdomTree WTI and WisdomTree 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 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 SP 500, you can compare the effects of market volatilities on WisdomTree WTI and WisdomTree 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree WTI and WisdomTree.

Diversification Opportunities for WisdomTree WTI and WisdomTree

0.38

Correlation Coefficient

WisdomTree WTI  WisdomTree

Weak diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree WTI Crude and WisdomTree SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SP 500 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SP 500 has no effect on the direction of WisdomTree WTI i.e., WisdomTree WTI and WisdomTree go up and down completely randomly.

Pair Corralation between WisdomTree WTI and WisdomTree

Assuming the 90 days trading horizon WisdomTree WTI Crude is expected to under-perform the WisdomTree. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree WTI Crude is 1.62 times less risky than WisdomTree. The etf trades about -0.02 of its potential returns per unit of risk. The WisdomTree SP 500 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,134  in WisdomTree SP 500 on September 29, 2024 and sell it today you would earn a total of  2,068  from holding WisdomTree SP 500 or generate 22.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.66%
Values	Daily Returns

WisdomTree WTI Crude  vs.  WisdomTree SP 500

WisdomTree WTI Crude

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree WTI Crude are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, WisdomTree WTI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WisdomTree SP 500

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SP 500 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WisdomTree reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree WTI and WisdomTree

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

The idea behind WisdomTree WTI Crude and WisdomTree SP 500 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.