Correlation Between WisdomTree Physical and SPDR Dow

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

By analyzing existing cross correlation between WisdomTree Physical Gold and SPDR Dow Jones, you can compare the effects of market volatilities on WisdomTree Physical and SPDR Dow 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 SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Physical and SPDR Dow.

Diversification Opportunities for WisdomTree Physical and SPDR Dow

-0.07

Correlation Coefficient

WisdomTree Physical  SPDR Dow

Good diversification

The 3 months correlation between WisdomTree and SPDR is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Physical Gold and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones 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 Gold are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of WisdomTree Physical i.e., WisdomTree Physical and SPDR Dow go up and down completely randomly.

Pair Corralation between WisdomTree Physical and SPDR Dow

Assuming the 90 days trading horizon WisdomTree Physical Gold is expected to generate 0.97 times more return on investment than SPDR Dow. However, WisdomTree Physical Gold is 1.04 times less risky than SPDR Dow. It trades about 0.22 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about -0.09 per unit of risk. If you would invest  23,346  in WisdomTree Physical Gold on December 30, 2024 and sell it today you would earn a total of  3,225  from holding WisdomTree Physical Gold or generate 13.81% return on investment over 90 days.

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

WisdomTree Physical Gold  vs.  SPDR Dow Jones

WisdomTree Physical Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Physical Gold are ranked lower than 17 (%) 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.

SPDR Dow Jones

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR Dow 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 Physical and SPDR Dow

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

The idea behind WisdomTree Physical Gold and SPDR Dow Jones 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.