Correlation Between WisdomTree China and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both WisdomTree China and Franklin FTSE 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 Franklin FTSE 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 Franklin FTSE Japan, you can compare the effects of market volatilities on WisdomTree China and Franklin FTSE 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 Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree China and Franklin FTSE.
Diversification Opportunities for WisdomTree China and Franklin FTSE
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between WisdomTree and Franklin is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree China ex State Owne and Franklin FTSE Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Japan 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 Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Japan has no effect on the direction of WisdomTree China i.e., WisdomTree China and Franklin FTSE go up and down completely randomly.
Pair Corralation between WisdomTree China and Franklin FTSE
Given the investment horizon of 90 days WisdomTree China ex State Owned is expected to under-perform the Franklin FTSE. In addition to that, WisdomTree China is 2.61 times more volatile than Franklin FTSE Japan. It trades about -0.08 of its total potential returns per unit of risk. Franklin FTSE Japan is currently generating about 0.12 per unit of volatility. If you would invest 2,886 in Franklin FTSE Japan on September 1, 2024 and sell it today you would earn a total of 70.00 from holding Franklin FTSE Japan or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
WisdomTree China ex State Owne vs. Franklin FTSE Japan
Performance |
| Timeline |
| WisdomTree China |
| Franklin FTSE Japan |
WisdomTree China and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree China and Franklin FTSE
The main advantage of trading using opposite WisdomTree China and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree China position performs unexpectedly, Franklin FTSE 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 Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.| WisdomTree China vs. Global X MSCI | WisdomTree China vs. WisdomTree Emerging Markets | WisdomTree China vs. Invesco China Technology | WisdomTree China vs. iShares MSCI China |
| Franklin FTSE vs. JPMorgan BetaBuilders Japan | Franklin FTSE vs. Franklin FTSE South | Franklin FTSE vs. Franklin FTSE United | Franklin FTSE vs. Franklin FTSE China |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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