Correlation Between WisdomTree New and IShares Core

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

By analyzing existing cross correlation between WisdomTree New Economy and iShares Core Dividend, you can compare the effects of market volatilities on WisdomTree New and IShares Core 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 New with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree New and IShares Core.

Diversification Opportunities for WisdomTree New and IShares Core

0.78

Correlation Coefficient

WisdomTree New  IShares Core

Poor diversification

The 3 months correlation between WisdomTree and IShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree New Economy and iShares Core Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Dividend and WisdomTree New 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 New Economy are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Dividend has no effect on the direction of WisdomTree New i.e., WisdomTree New and IShares Core go up and down completely randomly.

Pair Corralation between WisdomTree New and IShares Core

Given the investment horizon of 90 days WisdomTree New Economy is expected to generate 1.35 times more return on investment than IShares Core. However, WisdomTree New is 1.35 times more volatile than iShares Core Dividend. It trades about 0.02 of its potential returns per unit of risk. iShares Core Dividend is currently generating about 0.01 per unit of risk. If you would invest  1,718  in WisdomTree New Economy on December 30, 2024 and sell it today you would earn a total of  12.00  from holding WisdomTree New Economy or generate 0.7% return on investment over 90 days.

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

WisdomTree New Economy  vs.  iShares Core Dividend

WisdomTree New Economy

Risk-Adjusted Performance

Weak

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

iShares Core Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree New and IShares Core

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

The idea behind WisdomTree New Economy and iShares Core Dividend 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.