Correlation Between WisdomTree Floating and US Treasury

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

By analyzing existing cross correlation between WisdomTree Floating Rate and US Treasury 6, you can compare the effects of market volatilities on WisdomTree Floating and US Treasury 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 Floating with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Floating and US Treasury.

Diversification Opportunities for WisdomTree Floating and US Treasury

0.9

Correlation Coefficient

WisdomTree Floating  US Treasury

Almost no diversification

The 3 months correlation between WisdomTree and XBIL is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Floating Rate and US Treasury 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 6 and WisdomTree Floating 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 Floating Rate are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 6 has no effect on the direction of WisdomTree Floating i.e., WisdomTree Floating and US Treasury go up and down completely randomly.

Pair Corralation between WisdomTree Floating and US Treasury

Given the investment horizon of 90 days WisdomTree Floating Rate is expected to generate 0.78 times more return on investment than US Treasury. However, WisdomTree Floating Rate is 1.28 times less risky than US Treasury. It trades about 1.03 of its potential returns per unit of risk. US Treasury 6 is currently generating about 0.73 per unit of risk. If you would invest  4,977  in WisdomTree Floating Rate on December 29, 2024 and sell it today you would earn a total of  55.00  from holding WisdomTree Floating Rate or generate 1.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

WisdomTree Floating Rate  vs.  US Treasury 6

WisdomTree Floating Rate

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Floating Rate are ranked lower than 81 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, WisdomTree Floating is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

US Treasury 6

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 6 are ranked lower than 57 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with WisdomTree Floating and US Treasury

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

The idea behind WisdomTree Floating Rate and US Treasury 6 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.