Correlation Between Wisdomtree Digital and Specialized Technology

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

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

Diversification Opportunities for Wisdomtree Digital and Specialized Technology

0.45

Correlation Coefficient

Wisdomtree Digital  Specialized Technology

Very weak diversification

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

Pair Corralation between Wisdomtree Digital and Specialized Technology

Assuming the 90 days horizon Wisdomtree Digital Trust is expected to under-perform the Specialized Technology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Wisdomtree Digital Trust is 1.64 times less risky than Specialized Technology. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Specialized Technology Fund is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,275  in Specialized Technology Fund on October 9, 2024 and sell it today you would lose (88.00) from holding Specialized Technology Fund or give up 6.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Wisdomtree Digital Trust  vs.  Specialized Technology Fund

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 latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Specialized Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Specialized Technology Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Wisdomtree Digital and Specialized Technology

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

The idea behind Wisdomtree Digital Trust and Specialized Technology Fund 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.