Correlation Between WisdomTree Physical and AMS Small

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

By analyzing existing cross correlation between WisdomTree Physical Ethereum and AMS Small Cap, you can compare the effects of market volatilities on WisdomTree Physical and AMS Small 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 Physical with a short position of AMS Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Physical and AMS Small.

Diversification Opportunities for WisdomTree Physical and AMS Small

0.68

Correlation Coefficient

WisdomTree Physical  AMS Small

Poor diversification

The 3 months correlation between WisdomTree and AMS is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Physical Ethereum and AMS Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMS Small Cap and WisdomTree Physical 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 Physical Ethereum are associated (or correlated) with AMS Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMS Small Cap has no effect on the direction of WisdomTree Physical i.e., WisdomTree Physical and AMS Small go up and down completely randomly.

Pair Corralation between WisdomTree Physical and AMS Small

Assuming the 90 days trading horizon WisdomTree Physical Ethereum is expected to generate 5.49 times more return on investment than AMS Small. However, WisdomTree Physical is 5.49 times more volatile than AMS Small Cap. It trades about 0.29 of its potential returns per unit of risk. AMS Small Cap is currently generating about 0.16 per unit of risk. If you would invest  1,729  in WisdomTree Physical Ethereum on April 30, 2025 and sell it today you would earn a total of  1,920  from holding WisdomTree Physical Ethereum or generate 111.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

WisdomTree Physical Ethereum  vs.  AMS Small Cap

Pair Trading with WisdomTree Physical and AMS Small

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

The idea behind WisdomTree Physical Ethereum and AMS Small Cap 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.