Correlation Between WisdomTree Yield and IShares Core

Can any of the company-specific risk be diversified away by investing in both WisdomTree Yield and IShares 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 Yield and IShares Core 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 iShares Core SP, you can compare the effects of market volatilities on WisdomTree Yield and IShares 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 Yield with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Yield and IShares Core.

Diversification Opportunities for WisdomTree Yield and IShares Core

0.86

Correlation Coefficient

WisdomTree Yield  IShares Core

Very poor diversification

The 3 months correlation between WisdomTree and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Yield Enhanced and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of WisdomTree Yield i.e., WisdomTree Yield and IShares Core go up and down completely randomly.

Pair Corralation between WisdomTree Yield and IShares Core

Given the investment horizon of 90 days WisdomTree Yield is expected to generate 6.29 times less return on investment than IShares Core. But when comparing it to its historical volatility, WisdomTree Yield Enhanced is 4.06 times less risky than IShares Core. It trades about 0.17 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  55,979  in iShares Core SP on May 6, 2025 and sell it today you would earn a total of  7,438  from holding iShares Core SP or generate 13.29% 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.  iShares Core SP

WisdomTree Yield Enhanced

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Yield Enhanced are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, WisdomTree Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Core SP

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Core showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Yield and IShares Core

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

The idea behind WisdomTree Yield Enhanced and iShares Core SP 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.