Correlation Between WisdomTree and Dow Jones
Can any of the company-specific risk be diversified away by investing in both WisdomTree and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree SP 500 and Dow Jones Industrial, you can compare the effects of market volatilities on WisdomTree and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and Dow Jones.
Diversification Opportunities for WisdomTree and Dow Jones
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and Dow is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 SP 500 are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of WisdomTree i.e., WisdomTree and Dow Jones go up and down completely randomly.
Pair Corralation between WisdomTree and Dow Jones
Assuming the 90 days trading horizon WisdomTree SP 500 is expected to generate 3.0 times more return on investment than Dow Jones. However, WisdomTree is 3.0 times more volatile than Dow Jones Industrial. It trades about 0.28 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.23 per unit of risk. If you would invest 603,400 in WisdomTree SP 500 on April 24, 2025 and sell it today you would earn a total of 286,900 from holding WisdomTree SP 500 or generate 47.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.39% |
Values | Daily Returns |
WisdomTree SP 500 vs. Dow Jones Industrial
Performance |
Timeline |
WisdomTree and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
WisdomTree SP 500
Pair trading matchups for WisdomTree
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with WisdomTree and Dow Jones
The main advantage of trading using opposite WisdomTree and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.WisdomTree vs. Leverage Shares 3x | WisdomTree vs. GraniteShares 3x Long | WisdomTree vs. Leverage Shares 3x | WisdomTree vs. Leverage Shares 5x |
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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 Stocks Directory module to find actively traded stocks across global markets.
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