Correlation Between WisdomTree Short and IShares JP

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

By analyzing existing cross correlation between WisdomTree Short GBP and iShares JP Morgan, you can compare the effects of market volatilities on WisdomTree Short and IShares JP 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 Short with a short position of IShares JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Short and IShares JP.

Diversification Opportunities for WisdomTree Short and IShares JP

0.88

Correlation Coefficient

WisdomTree Short  IShares JP

Very poor diversification

The 3 months correlation between WisdomTree and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Short GBP and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan and WisdomTree Short 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 Short GBP are associated (or correlated) with IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of WisdomTree Short i.e., WisdomTree Short and IShares JP go up and down completely randomly.

Pair Corralation between WisdomTree Short and IShares JP

Assuming the 90 days trading horizon WisdomTree Short GBP is expected to generate 1.15 times more return on investment than IShares JP. However, WisdomTree Short is 1.15 times more volatile than iShares JP Morgan. It trades about 0.22 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.13 per unit of risk. If you would invest  6,110  in WisdomTree Short GBP on October 9, 2024 and sell it today you would earn a total of  142.00  from holding WisdomTree Short GBP or generate 2.32% return on investment over 90 days.

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

WisdomTree Short GBP  vs.  iShares JP Morgan

WisdomTree Short GBP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Short GBP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WisdomTree Short is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares JP Morgan

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares JP Morgan are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares JP 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 Short and IShares JP

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

The idea behind WisdomTree Short GBP and iShares JP Morgan 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.