Correlation Between WisdomTree Physical and WisdomTree Gold

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

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

Diversification Opportunities for WisdomTree Physical and WisdomTree Gold

0.55

Correlation Coefficient

WisdomTree Physical  WisdomTree Gold

Very weak diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Physical Polkadot and WisdomTree Gold EUR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Gold EUR and WisdomTree Physical 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 Physical Polkadot are associated (or correlated) with WisdomTree Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Gold EUR has no effect on the direction of WisdomTree Physical i.e., WisdomTree Physical and WisdomTree Gold go up and down completely randomly.

Pair Corralation between WisdomTree Physical and WisdomTree Gold

Assuming the 90 days trading horizon WisdomTree Physical Polkadot is expected to generate 6.33 times more return on investment than WisdomTree Gold. However, WisdomTree Physical is 6.33 times more volatile than WisdomTree Gold EUR. It trades about 0.04 of its potential returns per unit of risk. WisdomTree Gold EUR is currently generating about 0.0 per unit of risk. If you would invest  207.00  in WisdomTree Physical Polkadot on April 24, 2025 and sell it today you would earn a total of  8.00  from holding WisdomTree Physical Polkadot or generate 3.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.95%
Values	Daily Returns

WisdomTree Physical Polkadot  vs.  WisdomTree Gold EUR

WisdomTree Physical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Physical Polkadot are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WisdomTree Physical sustained solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Gold EUR

Risk-Adjusted Performance

Weak

Over the last 90 days WisdomTree Gold EUR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, WisdomTree Gold is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with WisdomTree Physical and WisdomTree Gold

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

The idea behind WisdomTree Physical Polkadot and WisdomTree Gold EUR 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.