Correlation Between WisdomTree Interest and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both WisdomTree Interest and IShares MSCI 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 Interest and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Interest Rate and iShares MSCI ACWI, you can compare the effects of market volatilities on WisdomTree Interest and IShares MSCI 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 Interest with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Interest and IShares MSCI.
Diversification Opportunities for WisdomTree Interest and IShares MSCI
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and IShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Interest Rate and iShares MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI ACWI and WisdomTree Interest 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 Interest Rate are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI ACWI has no effect on the direction of WisdomTree Interest i.e., WisdomTree Interest and IShares MSCI go up and down completely randomly.
Pair Corralation between WisdomTree Interest and IShares MSCI
Given the investment horizon of 90 days WisdomTree Interest is expected to generate 3.1 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, WisdomTree Interest Rate is 3.03 times less risky than IShares MSCI. It trades about 0.09 of its potential returns per unit of risk. iShares MSCI ACWI is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 10,855 in iShares MSCI ACWI on September 3, 2024 and sell it today you would earn a total of 1,322 from holding iShares MSCI ACWI or generate 12.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Interest Rate vs. iShares MSCI ACWI
Performance |
| Timeline |
| WisdomTree Interest Rate |
| iShares MSCI ACWI |
WisdomTree Interest and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Interest and IShares MSCI
The main advantage of trading using opposite WisdomTree Interest and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Interest position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind WisdomTree Interest Rate and iShares MSCI ACWI 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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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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