Correlation Between Vanguard and WisdomTree Efficient

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

By analyzing existing cross correlation between Vanguard SP 500 and WisdomTree Efficient Gold, you can compare the effects of market volatilities on Vanguard and WisdomTree Efficient 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 with a short position of WisdomTree Efficient. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and WisdomTree Efficient.

Diversification Opportunities for Vanguard and WisdomTree Efficient

0.38

Correlation Coefficient

Vanguard  WisdomTree Efficient

Weak diversification

The 3 months correlation between Vanguard and WisdomTree is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and WisdomTree Efficient Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Efficient Gold and Vanguard 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 SP 500 are associated (or correlated) with WisdomTree Efficient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Efficient Gold has no effect on the direction of Vanguard i.e., Vanguard and WisdomTree Efficient go up and down completely randomly.

Pair Corralation between Vanguard and WisdomTree Efficient

Considering the 90-day investment horizon Vanguard SP 500 is expected to generate 0.62 times more return on investment than WisdomTree Efficient. However, Vanguard SP 500 is 1.61 times less risky than WisdomTree Efficient. It trades about 0.06 of its potential returns per unit of risk. WisdomTree Efficient Gold is currently generating about 0.03 per unit of risk. If you would invest  53,445  in Vanguard SP 500 on October 22, 2024 and sell it today you would earn a total of  1,501  from holding Vanguard SP 500 or generate 2.81% return on investment over 90 days.

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

Vanguard SP 500  vs.  WisdomTree Efficient Gold

Vanguard SP 500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

WisdomTree Efficient Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Efficient Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, WisdomTree Efficient is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard and WisdomTree Efficient

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

The idea behind Vanguard SP 500 and WisdomTree Efficient Gold 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.