Correlation Between SPDR Dow and WisdomTree New

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

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

Diversification Opportunities for SPDR Dow and WisdomTree New

0.92

Correlation Coefficient

SPDR Dow  WisdomTree New

Almost no diversification

The 3 months correlation between SPDR and WisdomTree is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and WisdomTree New Economy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree New Economy and SPDR Dow 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 SPDR Dow Jones are associated (or correlated) with WisdomTree New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree New Economy has no effect on the direction of SPDR Dow i.e., SPDR Dow and WisdomTree New go up and down completely randomly.

Pair Corralation between SPDR Dow and WisdomTree New

Considering the 90-day investment horizon SPDR Dow Jones is expected to generate 0.92 times more return on investment than WisdomTree New. However, SPDR Dow Jones is 1.09 times less risky than WisdomTree New. It trades about -0.14 of its potential returns per unit of risk. WisdomTree New Economy is currently generating about -0.2 per unit of risk. If you would invest  4,807  in SPDR Dow Jones on September 16, 2024 and sell it today you would lose (322.00) from holding SPDR Dow Jones or give up 6.7% of portfolio value over 90 days.

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

SPDR Dow Jones  vs.  WisdomTree New Economy

SPDR Dow Jones

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

WisdomTree New Economy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree New Economy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with SPDR Dow and WisdomTree New

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

The idea behind SPDR Dow Jones and WisdomTree New Economy 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.