Correlation Between WisdomTree Physical and WisdomTree Wheat

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

By analyzing existing cross correlation between WisdomTree Physical Silver and WisdomTree Wheat 2x, you can compare the effects of market volatilities on WisdomTree Physical and WisdomTree Wheat 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 Physical with a short position of WisdomTree Wheat. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Physical and WisdomTree Wheat.

Diversification Opportunities for WisdomTree Physical and WisdomTree Wheat

-0.09

Correlation Coefficient

WisdomTree Physical  WisdomTree Wheat

Good diversification

The 3 months correlation between WisdomTree and WisdomTree is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Physical Silver and WisdomTree Wheat 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Wheat and WisdomTree Physical 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 Physical Silver are associated (or correlated) with WisdomTree Wheat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Wheat has no effect on the direction of WisdomTree Physical i.e., WisdomTree Physical and WisdomTree Wheat go up and down completely randomly.

Pair Corralation between WisdomTree Physical and WisdomTree Wheat

Assuming the 90 days trading horizon WisdomTree Physical Silver is expected to generate 0.56 times more return on investment than WisdomTree Wheat. However, WisdomTree Physical Silver is 1.78 times less risky than WisdomTree Wheat. It trades about -0.12 of its potential returns per unit of risk. WisdomTree Wheat 2x is currently generating about -0.11 per unit of risk. If you would invest  2,687  in WisdomTree Physical Silver on September 24, 2024 and sell it today you would lose (85.00) from holding WisdomTree Physical Silver or give up 3.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

WisdomTree Physical Silver  vs.  WisdomTree Wheat 2x

WisdomTree Physical

Risk-Adjusted Performance

0 of 100

Weak

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

WisdomTree Wheat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Wheat 2x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with WisdomTree Physical and WisdomTree Wheat

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

The idea behind WisdomTree Physical Silver and WisdomTree Wheat 2x 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.