Correlation Between MFUT and WisdomTree Inflation

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

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

Diversification Opportunities for MFUT and WisdomTree Inflation

-0.11

Correlation Coefficient

MFUT  WisdomTree Inflation

Good diversification

The 3 months correlation between MFUT and WisdomTree is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding MFUT and WisdomTree Inflation Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Inflation Plus and MFUT 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 MFUT are associated (or correlated) with WisdomTree Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Inflation Plus has no effect on the direction of MFUT i.e., MFUT and WisdomTree Inflation go up and down completely randomly.

Pair Corralation between MFUT and WisdomTree Inflation

Given the investment horizon of 90 days MFUT is expected to generate 2.04 times less return on investment than WisdomTree Inflation. But when comparing it to its historical volatility, MFUT is 1.21 times less risky than WisdomTree Inflation. It trades about 0.09 of its potential returns per unit of risk. WisdomTree Inflation Plus is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,990  in WisdomTree Inflation Plus on April 29, 2025 and sell it today you would earn a total of  74.00  from holding WisdomTree Inflation Plus or generate 2.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	43.55%
Values	Daily Returns

MFUT  vs.  WisdomTree Inflation Plus

MFUT

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MFUT are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MFUT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Inflation Plus

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Inflation Plus are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, WisdomTree Inflation is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MFUT and WisdomTree Inflation

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

The idea behind MFUT and WisdomTree Inflation Plus 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.