Correlation Between Wilshire Income and Wilshire Large

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

By analyzing existing cross correlation between Wilshire Income Opport and Wilshire Large, you can compare the effects of market volatilities on Wilshire Income and Wilshire Large 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 Wilshire Income with a short position of Wilshire Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilshire Income and Wilshire Large.

Diversification Opportunities for Wilshire Income and Wilshire Large

-0.64

Correlation Coefficient

Wilshire Income  Wilshire Large

Excellent diversification

The 3 months correlation between Wilshire and Wilshire is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Wilshire Income Opport and Wilshire Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire Large and Wilshire Income 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 Wilshire Income Opport are associated (or correlated) with Wilshire Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire Large has no effect on the direction of Wilshire Income i.e., Wilshire Income and Wilshire Large go up and down completely randomly.

Pair Corralation between Wilshire Income and Wilshire Large

Assuming the 90 days horizon Wilshire Income Opport is expected to under-perform the Wilshire Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Wilshire Income Opport is 5.09 times less risky than Wilshire Large. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Wilshire Large is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,209  in Wilshire Large on September 5, 2024 and sell it today you would earn a total of  679.00  from holding Wilshire Large or generate 16.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Wilshire Income Opport  vs.  Wilshire Large

Wilshire Income Opport

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wilshire Large

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wilshire Large are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Wilshire Large showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wilshire Income and Wilshire Large

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

The idea behind Wilshire Income Opport and Wilshire Large 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.