Correlation Between VivoPower International and Wisdomtree Digital

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

By analyzing existing cross correlation between VivoPower International PLC and Wisdomtree Digital Trust, you can compare the effects of market volatilities on VivoPower International and Wisdomtree Digital 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 VivoPower International with a short position of Wisdomtree Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of VivoPower International and Wisdomtree Digital.

Diversification Opportunities for VivoPower International and Wisdomtree Digital

0.45

Correlation Coefficient

VivoPower International  Wisdomtree Digital

Very weak diversification

The 3 months correlation between VivoPower and Wisdomtree is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding VivoPower International PLC and Wisdomtree Digital Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wisdomtree Digital Trust and VivoPower International 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 VivoPower International PLC are associated (or correlated) with Wisdomtree Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wisdomtree Digital Trust has no effect on the direction of VivoPower International i.e., VivoPower International and Wisdomtree Digital go up and down completely randomly.

Pair Corralation between VivoPower International and Wisdomtree Digital

Given the investment horizon of 90 days VivoPower International PLC is expected to generate 49.9 times more return on investment than Wisdomtree Digital. However, VivoPower International is 49.9 times more volatile than Wisdomtree Digital Trust. It trades about 0.04 of its potential returns per unit of risk. Wisdomtree Digital Trust is currently generating about 0.03 per unit of risk. If you would invest  260.00  in VivoPower International PLC on September 14, 2024 and sell it today you would lose (135.00) from holding VivoPower International PLC or give up 51.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.97%
Values	Daily Returns

VivoPower International PLC  vs.  Wisdomtree Digital Trust

VivoPower International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VivoPower International PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, VivoPower International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wisdomtree Digital Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wisdomtree Digital Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wisdomtree Digital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VivoPower International and Wisdomtree Digital

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

The idea behind VivoPower International PLC and Wisdomtree Digital Trust 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.