Correlation Between Vanguard Information and WisdomTree Cybersecurity

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

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

Diversification Opportunities for Vanguard Information and WisdomTree Cybersecurity

0.61

Correlation Coefficient

Vanguard Information  WisdomTree Cybersecurity

Poor diversification

The 3 months correlation between Vanguard and WisdomTree is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Information Technolog and WisdomTree Cybersecurity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Cybersecurity and Vanguard Information 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 Vanguard Information Technology are associated (or correlated) with WisdomTree Cybersecurity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Cybersecurity has no effect on the direction of Vanguard Information i.e., Vanguard Information and WisdomTree Cybersecurity go up and down completely randomly.

Pair Corralation between Vanguard Information and WisdomTree Cybersecurity

Considering the 90-day investment horizon Vanguard Information Technology is expected to under-perform the WisdomTree Cybersecurity. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Information Technology is 1.1 times less risky than WisdomTree Cybersecurity. The etf trades about -0.12 of its potential returns per unit of risk. The WisdomTree Cybersecurity is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,853  in WisdomTree Cybersecurity on December 30, 2024 and sell it today you would lose (95.00) from holding WisdomTree Cybersecurity or give up 3.33% of portfolio value over 90 days.

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

Vanguard Information Technolog  vs.  WisdomTree Cybersecurity

Vanguard Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

WisdomTree Cybersecurity

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Cybersecurity has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, WisdomTree Cybersecurity is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Information and WisdomTree Cybersecurity

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

The idea behind Vanguard Information Technology and WisdomTree Cybersecurity 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.