Correlation Between SPDR DoubleLine and WisdomTree Interest

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

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

Diversification Opportunities for SPDR DoubleLine and WisdomTree Interest

0.23

Correlation Coefficient

SPDR DoubleLine  WisdomTree Interest

Modest diversification

The 3 months correlation between SPDR and WisdomTree is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding SPDR DoubleLine Short and WisdomTree Interest Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Interest Rate and SPDR DoubleLine 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 DoubleLine Short are associated (or correlated) with WisdomTree Interest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Interest Rate has no effect on the direction of SPDR DoubleLine i.e., SPDR DoubleLine and WisdomTree Interest go up and down completely randomly.

Pair Corralation between SPDR DoubleLine and WisdomTree Interest

Given the investment horizon of 90 days SPDR DoubleLine is expected to generate 1.15 times less return on investment than WisdomTree Interest. But when comparing it to its historical volatility, SPDR DoubleLine Short is 2.38 times less risky than WisdomTree Interest. It trades about 0.24 of its potential returns per unit of risk. WisdomTree Interest Rate is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,046  in WisdomTree Interest Rate on September 12, 2024 and sell it today you would earn a total of  205.00  from holding WisdomTree Interest Rate or generate 10.02% return on investment over 90 days.

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

SPDR DoubleLine Short  vs.  WisdomTree Interest Rate

SPDR DoubleLine Short

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR DoubleLine Short are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Interest Rate

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Interest Rate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, WisdomTree Interest is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR DoubleLine and WisdomTree Interest

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

The idea behind SPDR DoubleLine Short and WisdomTree Interest Rate 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.