Correlation Between WisdomTree Physical and WisdomTree WTI

Can any of the company-specific risk be diversified away by investing in both WisdomTree Physical 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 WisdomTree Physical and WisdomTree WTI 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 WTI Crude, you can compare the effects of market volatilities on WisdomTree Physical 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 WisdomTree Physical with a short position of WisdomTree WTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Physical and WisdomTree WTI.

Diversification Opportunities for WisdomTree Physical and WisdomTree WTI

0.1

Correlation Coefficient

WisdomTree Physical  WisdomTree WTI

Average diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Physical Silver 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 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 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 WisdomTree Physical i.e., WisdomTree Physical and WisdomTree WTI go up and down completely randomly.

Pair Corralation between WisdomTree Physical and WisdomTree WTI

Assuming the 90 days trading horizon WisdomTree Physical Silver is expected to under-perform the WisdomTree WTI. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Physical Silver is 1.03 times less risky than WisdomTree WTI. The etf trades about -0.01 of its potential returns per unit of risk. The WisdomTree WTI Crude is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  859.00  in WisdomTree WTI Crude on September 24, 2024 and sell it today you would earn a total of  60.00  from holding WisdomTree WTI Crude or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

WisdomTree Physical Silver  vs.  WisdomTree WTI Crude

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 WTI Crude

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree WTI Crude are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, WisdomTree WTI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WisdomTree Physical and WisdomTree WTI

The main advantage of trading using opposite WisdomTree Physical and WisdomTree WTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Physical 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 WisdomTree Physical Silver 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.