Correlation Between WisdomTree and WisdomTree Trust

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

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

Diversification Opportunities for WisdomTree and WisdomTree Trust

-0.26

Correlation Coefficient

WisdomTree  WisdomTree Trust

Very good diversification

The 3 months correlation between WisdomTree and WisdomTree is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust and WisdomTree 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 are associated (or correlated) with WisdomTree Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Trust has no effect on the direction of WisdomTree i.e., WisdomTree and WisdomTree Trust go up and down completely randomly.

Pair Corralation between WisdomTree and WisdomTree Trust

Given the investment horizon of 90 days WisdomTree is expected to generate 4.5 times less return on investment than WisdomTree Trust. But when comparing it to its historical volatility, WisdomTree is 1.07 times less risky than WisdomTree Trust. It trades about 0.05 of its potential returns per unit of risk. WisdomTree Trust is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,158  in WisdomTree Trust on May 11, 2025 and sell it today you would earn a total of  395.00  from holding WisdomTree Trust or generate 18.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.21%
Values	Daily Returns

WisdomTree  vs.  WisdomTree Trust

WisdomTree

Risk-Adjusted Performance

Soft

Over the last 90 days WisdomTree has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WisdomTree is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, WisdomTree Trust demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree and WisdomTree Trust

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

The idea behind WisdomTree and WisdomTree Trust 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.