Correlation Between WisdomTree Multifactor and GDI Integrated
Can any of the company-specific risk be diversified away by investing in both WisdomTree Multifactor and GDI Integrated 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 Multifactor and GDI Integrated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Multifactor and GDI Integrated, you can compare the effects of market volatilities on WisdomTree Multifactor and GDI Integrated 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 Multifactor with a short position of GDI Integrated. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Multifactor and GDI Integrated.
Diversification Opportunities for WisdomTree Multifactor and GDI Integrated
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WisdomTree and GDI is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Multifactor and GDI Integrated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GDI Integrated and WisdomTree Multifactor 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 Multifactor are associated (or correlated) with GDI Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GDI Integrated has no effect on the direction of WisdomTree Multifactor i.e., WisdomTree Multifactor and GDI Integrated go up and down completely randomly.
Pair Corralation between WisdomTree Multifactor and GDI Integrated
Given the investment horizon of 90 days WisdomTree Multifactor is expected to under-perform the GDI Integrated. In addition to that, WisdomTree Multifactor is 1.01 times more volatile than GDI Integrated. It trades about -0.26 of its total potential returns per unit of risk. GDI Integrated is currently generating about 0.09 per unit of volatility. If you would invest 3,866 in GDI Integrated on January 19, 2024 and sell it today you would earn a total of 45.00 from holding GDI Integrated or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Multifactor vs. GDI Integrated
Performance |
| Timeline |
| WisdomTree Multifactor |
| GDI Integrated |
WisdomTree Multifactor and GDI Integrated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Multifactor and GDI Integrated
The main advantage of trading using opposite WisdomTree Multifactor and GDI Integrated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Multifactor position performs unexpectedly, GDI Integrated 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 GDI Integrated will offset losses from the drop in GDI Integrated's long position.The idea behind WisdomTree Multifactor and GDI Integrated 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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