Correlation Between SPDR Bloomberg and WisdomTree Floating

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

By analyzing existing cross correlation between SPDR Bloomberg 1 3 and WisdomTree Floating Rate, you can compare the effects of market volatilities on SPDR Bloomberg and WisdomTree Floating 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 SPDR Bloomberg with a short position of WisdomTree Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Bloomberg and WisdomTree Floating.

Diversification Opportunities for SPDR Bloomberg and WisdomTree Floating

0.99

Correlation Coefficient

SPDR Bloomberg  WisdomTree Floating

No risk reduction

The 3 months correlation between SPDR and WisdomTree is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg 1 3 and WisdomTree Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Floating Rate and SPDR Bloomberg 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 SPDR Bloomberg 1 3 are associated (or correlated) with WisdomTree Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Floating Rate has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and WisdomTree Floating go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and WisdomTree Floating

Considering the 90-day investment horizon SPDR Bloomberg is expected to generate 1.23 times less return on investment than WisdomTree Floating. But when comparing it to its historical volatility, SPDR Bloomberg 1 3 is 1.29 times less risky than WisdomTree Floating. It trades about 1.09 of its potential returns per unit of risk. WisdomTree Floating Rate is currently generating about 1.04 of returns per unit of risk over similar time horizon. If you would invest  5,009  in WisdomTree Floating Rate on February 1, 2024 and sell it today you would earn a total of  25.00  from holding WisdomTree Floating Rate or generate 0.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

SPDR Bloomberg 1 3  vs.  WisdomTree Floating Rate

SPDR Bloomberg 1

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg 1 3 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, SPDR Bloomberg is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

WisdomTree Floating Rate

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Floating Rate are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, WisdomTree Floating is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SPDR Bloomberg and WisdomTree Floating

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

The idea behind SPDR Bloomberg 1 3 and WisdomTree Floating Rate 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.