Correlation Between WisdomTree High and WisdomTree Short

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

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

Diversification Opportunities for WisdomTree High and WisdomTree Short

0.86

Correlation Coefficient

WisdomTree High  WisdomTree Short

Very poor diversification

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

Pair Corralation between WisdomTree High and WisdomTree Short

Given the investment horizon of 90 days WisdomTree High is expected to generate 1.76 times less return on investment than WisdomTree Short. In addition to that, WisdomTree High is 1.7 times more volatile than WisdomTree Short Term Corporate. It trades about 0.08 of its total potential returns per unit of risk. WisdomTree Short Term Corporate is currently generating about 0.24 per unit of volatility. If you would invest  4,784  in WisdomTree Short Term Corporate on May 13, 2025 and sell it today you would earn a total of  98.50  from holding WisdomTree Short Term Corporate or generate 2.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

WisdomTree High Yield  vs.  WisdomTree Short Term Corporat

WisdomTree High Yield

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree High Yield are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, WisdomTree High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Short Term Corporate are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, WisdomTree Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WisdomTree High and WisdomTree Short

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

The idea behind WisdomTree High Yield and WisdomTree Short Term Corporate 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.