Correlation Between WisdomTree China and Global X
Can any of the company-specific risk be diversified away by investing in both WisdomTree China and Global X 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 China and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree China ex State Owned and Global X MSCI, you can compare the effects of market volatilities on WisdomTree China and Global X 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 China with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree China and Global X.
Diversification Opportunities for WisdomTree China and Global X
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between WisdomTree and Global is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree China ex State Owne and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI and WisdomTree China 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 China ex State Owned are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MSCI has no effect on the direction of WisdomTree China i.e., WisdomTree China and Global X go up and down completely randomly.
Pair Corralation between WisdomTree China and Global X
Given the investment horizon of 90 days WisdomTree China ex State Owned is expected to generate 1.0 times more return on investment than Global X. However, WisdomTree China is 1.0 times more volatile than Global X MSCI. It trades about -0.18 of its potential returns per unit of risk. Global X MSCI is currently generating about -0.21 per unit of risk. If you would invest 3,292 in WisdomTree China ex State Owned on August 28, 2024 and sell it today you would lose (293.00) from holding WisdomTree China ex State Owned or give up 8.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree China ex State Owne vs. Global X MSCI
Performance |
| Timeline |
| WisdomTree China |
| Global X MSCI |
WisdomTree China and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree China and Global X
The main advantage of trading using opposite WisdomTree China and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree China position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| WisdomTree China vs. iShares MSCI Singapore | WisdomTree China vs. iShares MSCI Malaysia | WisdomTree China vs. iShares MSCI Australia | WisdomTree China vs. iShares MSCI South |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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