Correlation Between Vanguard Funds and WisdomTree WTI

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

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

Diversification Opportunities for Vanguard Funds and WisdomTree WTI

0.86

Correlation Coefficient

Vanguard Funds  WisdomTree WTI

Very poor diversification

The 3 months correlation between Vanguard and WisdomTree is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and WisdomTree WTI Crude in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree WTI Crude and Vanguard Funds 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 Funds Public are associated (or correlated) with WisdomTree WTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree WTI Crude has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and WisdomTree WTI go up and down completely randomly.

Pair Corralation between Vanguard Funds and WisdomTree WTI

Assuming the 90 days trading horizon Vanguard Funds Public is expected to under-perform the WisdomTree WTI. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Funds Public is 1.65 times less risky than WisdomTree WTI. The etf trades about -0.1 of its potential returns per unit of risk. The WisdomTree WTI Crude is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  935.00  in WisdomTree WTI Crude on December 26, 2024 and sell it today you would lose (16.00) from holding WisdomTree WTI Crude or give up 1.71% of portfolio value over 90 days.

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

Vanguard Funds Public  vs.  WisdomTree WTI Crude

Vanguard Funds Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Funds Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vanguard Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WisdomTree WTI Crude

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree WTI Crude has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WisdomTree WTI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Funds and WisdomTree WTI

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

The idea behind Vanguard Funds Public and WisdomTree WTI Crude 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.