Correlation Between WisdomTree Aluminium and Xtrackers

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

By analyzing existing cross correlation between WisdomTree Aluminium 2x and Xtrackers SP 500, you can compare the effects of market volatilities on WisdomTree Aluminium and Xtrackers 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 Aluminium with a short position of Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Aluminium and Xtrackers.

Diversification Opportunities for WisdomTree Aluminium and Xtrackers

0.69

Correlation Coefficient

WisdomTree Aluminium  Xtrackers

Poor diversification

The 3 months correlation between WisdomTree and Xtrackers is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Aluminium 2x and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 and WisdomTree Aluminium 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 Aluminium 2x are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of WisdomTree Aluminium i.e., WisdomTree Aluminium and Xtrackers go up and down completely randomly.

Pair Corralation between WisdomTree Aluminium and Xtrackers

Assuming the 90 days trading horizon WisdomTree Aluminium is expected to generate 1.61 times less return on investment than Xtrackers. In addition to that, WisdomTree Aluminium is 1.24 times more volatile than Xtrackers SP 500. It trades about 0.15 of its total potential returns per unit of risk. Xtrackers SP 500 is currently generating about 0.3 per unit of volatility. If you would invest  19,542  in Xtrackers SP 500 on April 25, 2025 and sell it today you would earn a total of  6,223  from holding Xtrackers SP 500 or generate 31.84% return on investment over 90 days.

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

WisdomTree Aluminium 2x  vs.  Xtrackers SP 500

WisdomTree Aluminium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Aluminium 2x are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Aluminium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP 500 are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Xtrackers unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Aluminium and Xtrackers

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

The idea behind WisdomTree Aluminium 2x and Xtrackers SP 500 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.