Correlation Between WisdomTree Yield and Overlay Shares

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

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

Diversification Opportunities for WisdomTree Yield and Overlay Shares

0.89

Correlation Coefficient

WisdomTree Yield  Overlay Shares

Very poor diversification

The 3 months correlation between WisdomTree and Overlay is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Yield Enhanced and Overlay Shares Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Core and WisdomTree Yield 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 Yield Enhanced are associated (or correlated) with Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Core has no effect on the direction of WisdomTree Yield i.e., WisdomTree Yield and Overlay Shares go up and down completely randomly.

Pair Corralation between WisdomTree Yield and Overlay Shares

Given the investment horizon of 90 days WisdomTree Yield is expected to generate 1.23 times less return on investment than Overlay Shares. But when comparing it to its historical volatility, WisdomTree Yield Enhanced is 1.26 times less risky than Overlay Shares. It trades about 0.1 of its potential returns per unit of risk. Overlay Shares Core is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,671  in Overlay Shares Core on July 16, 2025 and sell it today you would earn a total of  396.00  from holding Overlay Shares Core or generate 23.7% return on investment over 90 days.

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

WisdomTree Yield Enhanced  vs.  Overlay Shares Core

WisdomTree Yield Enhanced

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Yield Enhanced are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, WisdomTree Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Overlay Shares Core

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Overlay Shares Core are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Overlay Shares is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree Yield and Overlay Shares

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

The idea behind WisdomTree Yield Enhanced and Overlay Shares Core 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.