Correlation Between WisdomTree Interest and FlexShares Core

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

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

Diversification Opportunities for WisdomTree Interest and FlexShares Core

-0.13

Correlation Coefficient

WisdomTree Interest  FlexShares Core

Good diversification

The 3 months correlation between WisdomTree and FlexShares is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Interest Rate and FlexShares Core Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Core Select and WisdomTree Interest 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 Interest Rate are associated (or correlated) with FlexShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Core Select has no effect on the direction of WisdomTree Interest i.e., WisdomTree Interest and FlexShares Core go up and down completely randomly.

Pair Corralation between WisdomTree Interest and FlexShares Core

Given the investment horizon of 90 days WisdomTree Interest Rate is expected to generate 0.64 times more return on investment than FlexShares Core. However, WisdomTree Interest Rate is 1.56 times less risky than FlexShares Core. It trades about 0.1 of its potential returns per unit of risk. FlexShares Core Select is currently generating about 0.04 per unit of risk. If you would invest  1,973  in WisdomTree Interest Rate on February 16, 2025 and sell it today you would earn a total of  254.00  from holding WisdomTree Interest Rate or generate 12.87% return on investment over 90 days.

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

WisdomTree Interest Rate  vs.  FlexShares Core Select

WisdomTree Interest Rate

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Interest Rate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, WisdomTree Interest is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

FlexShares Core Select

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Core Select are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, FlexShares Core is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree Interest and FlexShares Core

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

The idea behind WisdomTree Interest Rate and FlexShares Core Select 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.