Correlation Between Barclays ETN and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both Barclays ETN and WisdomTree Europe 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 Barclays ETN and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barclays ETN Select and WisdomTree Europe Quality, you can compare the effects of market volatilities on Barclays ETN and WisdomTree Europe 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 Barclays ETN with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barclays ETN and WisdomTree Europe.
Diversification Opportunities for Barclays ETN and WisdomTree Europe
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Barclays and WisdomTree is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Barclays ETN Select and WisdomTree Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Quality and Barclays ETN 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 Barclays ETN Select are associated (or correlated) with WisdomTree Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Quality has no effect on the direction of Barclays ETN i.e., Barclays ETN and WisdomTree Europe go up and down completely randomly.
Pair Corralation between Barclays ETN and WisdomTree Europe
Given the investment horizon of 90 days Barclays ETN Select is expected to generate 1.12 times more return on investment than WisdomTree Europe. However, Barclays ETN is 1.12 times more volatile than WisdomTree Europe Quality. It trades about 0.5 of its potential returns per unit of risk. WisdomTree Europe Quality is currently generating about -0.39 per unit of risk. If you would invest 2,654 in Barclays ETN Select on August 27, 2024 and sell it today you would earn a total of 303.00 from holding Barclays ETN Select or generate 11.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barclays ETN Select vs. WisdomTree Europe Quality
Performance |
| Timeline |
| Barclays ETN Select |
| WisdomTree Europe Quality |
Barclays ETN and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barclays ETN and WisdomTree Europe
The main advantage of trading using opposite Barclays ETN and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays ETN position performs unexpectedly, WisdomTree Europe 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 Europe will offset losses from the drop in WisdomTree Europe's long position.The idea behind Barclays ETN Select and WisdomTree Europe Quality 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.| WisdomTree Europe vs. WisdomTree International Hedged | WisdomTree Europe vs. WisdomTree Emerging Markets | WisdomTree Europe vs. WisdomTree Dynamic Currency |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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