Correlation Between IQ Global and WisdomTree Trust

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

By analyzing existing cross correlation between IQ Global Equity and WisdomTree Trust , you can compare the effects of market volatilities on IQ Global and WisdomTree Trust 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 IQ Global with a short position of WisdomTree Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ Global and WisdomTree Trust.

Diversification Opportunities for IQ Global and WisdomTree Trust

0.32

Correlation Coefficient

IQ Global  WisdomTree Trust

Weak diversification

The 3 months correlation between WRND and WisdomTree is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding IQ Global Equity and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust and IQ Global 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 IQ Global Equity are associated (or correlated) with WisdomTree Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Trust has no effect on the direction of IQ Global i.e., IQ Global and WisdomTree Trust go up and down completely randomly.

Pair Corralation between IQ Global and WisdomTree Trust

Given the investment horizon of 90 days IQ Global Equity is expected to generate 1.05 times more return on investment than WisdomTree Trust. However, IQ Global is 1.05 times more volatile than WisdomTree Trust . It trades about 0.02 of its potential returns per unit of risk. WisdomTree Trust is currently generating about -0.03 per unit of risk. If you would invest  2,955  in IQ Global Equity on December 29, 2024 and sell it today you would earn a total of  23.00  from holding IQ Global Equity or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

IQ Global Equity  vs.  WisdomTree Trust

IQ Global Equity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IQ Global Equity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IQ Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WisdomTree Trust is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IQ Global and WisdomTree Trust

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

The idea behind IQ Global Equity and WisdomTree 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.