Correlation Between Rock Tech and WisdomTree Investments

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

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

Diversification Opportunities for Rock Tech and WisdomTree Investments

-0.71

Correlation Coefficient

Rock Tech  WisdomTree Investments

Pay attention - limited upside

The 3 months correlation between Rock and WisdomTree is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Rock Tech Lithium and WisdomTree Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Investments and Rock Tech 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 Rock Tech Lithium are associated (or correlated) with WisdomTree Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Investments has no effect on the direction of Rock Tech i.e., Rock Tech and WisdomTree Investments go up and down completely randomly.

Pair Corralation between Rock Tech and WisdomTree Investments

Assuming the 90 days trading horizon Rock Tech Lithium is expected to under-perform the WisdomTree Investments. In addition to that, Rock Tech is 2.33 times more volatile than WisdomTree Investments. It trades about -0.01 of its total potential returns per unit of risk. WisdomTree Investments is currently generating about 0.07 per unit of volatility. If you would invest  502.00  in WisdomTree Investments on October 23, 2024 and sell it today you would earn a total of  425.00  from holding WisdomTree Investments or generate 84.66% return on investment over 90 days.

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

Rock Tech Lithium  vs.  WisdomTree Investments

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Rock Tech is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WisdomTree Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WisdomTree Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rock Tech and WisdomTree Investments

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

The idea behind Rock Tech Lithium and WisdomTree Investments 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.