Correlation Between WisdomTree Physical and WisdomTree Bitcoin

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

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

Diversification Opportunities for WisdomTree Physical and WisdomTree Bitcoin

-0.35

Correlation Coefficient

WisdomTree Physical  WisdomTree Bitcoin

Very good diversification

The 3 months correlation between WisdomTree and WisdomTree is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Physical Silver and WisdomTree Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Bitcoin and WisdomTree Physical 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 Physical Silver are associated (or correlated) with WisdomTree Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Bitcoin has no effect on the direction of WisdomTree Physical i.e., WisdomTree Physical and WisdomTree Bitcoin go up and down completely randomly.

Pair Corralation between WisdomTree Physical and WisdomTree Bitcoin

Assuming the 90 days trading horizon WisdomTree Physical is expected to generate 62.67 times less return on investment than WisdomTree Bitcoin. But when comparing it to its historical volatility, WisdomTree Physical Silver is 28.13 times less risky than WisdomTree Bitcoin. It trades about 0.04 of its potential returns per unit of risk. WisdomTree Bitcoin is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  950.00  in WisdomTree Bitcoin on October 12, 2024 and sell it today you would earn a total of  1,302  from holding WisdomTree Bitcoin or generate 137.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

WisdomTree Physical Silver  vs.  WisdomTree Bitcoin

WisdomTree Physical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Physical Silver are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Physical unveiled solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Bitcoin

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Bitcoin are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Bitcoin unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Physical and WisdomTree Bitcoin

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

The idea behind WisdomTree Physical Silver and WisdomTree Bitcoin 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.