Correlation Between WisdomTree New and SPDR SP

Can any of the company-specific risk be diversified away by investing in both WisdomTree New and SPDR SP 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 SPDR SP 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 SPDR SP Retail, you can compare the effects of market volatilities on WisdomTree New and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree New and SPDR SP.

Diversification Opportunities for WisdomTree New and SPDR SP

-0.42

Correlation Coefficient

WisdomTree New  SPDR SP

Very good diversification

The 3 months correlation between WisdomTree and SPDR is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree New Economy and SPDR SP Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Retail 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Retail has no effect on the direction of WisdomTree New i.e., WisdomTree New and SPDR SP go up and down completely randomly.

Pair Corralation between WisdomTree New and SPDR SP

Given the investment horizon of 90 days WisdomTree New Economy is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree New Economy is 1.48 times less risky than SPDR SP. The etf trades about -0.01 of its potential returns per unit of risk. The SPDR SP Retail is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,620  in SPDR SP Retail on August 30, 2024 and sell it today you would earn a total of  671.00  from holding SPDR SP Retail or generate 8.81% return on investment over 90 days.

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

WisdomTree New Economy  vs.  SPDR SP Retail

WisdomTree New Economy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree New Economy has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

SPDR SP Retail

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Retail are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with WisdomTree New and SPDR SP

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

The idea behind WisdomTree New Economy and SPDR SP Retail 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .