Correlation Between WisdomTree China and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both WisdomTree China and WisdomTree Emerging 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 WisdomTree Emerging 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 WisdomTree Emerging Markets, you can compare the effects of market volatilities on WisdomTree China and WisdomTree Emerging 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 WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree China and WisdomTree Emerging.
Diversification Opportunities for WisdomTree China and WisdomTree Emerging
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree China ex State Owne and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging 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 WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of WisdomTree China i.e., WisdomTree China and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between WisdomTree China and WisdomTree Emerging
Given the investment horizon of 90 days WisdomTree China ex State Owned is expected to under-perform the WisdomTree Emerging. In addition to that, WisdomTree China is 3.36 times more volatile than WisdomTree Emerging Markets. It trades about -0.04 of its total potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about -0.13 per unit of volatility. If you would invest 3,303 in WisdomTree Emerging Markets on August 30, 2024 and sell it today you would lose (181.00) from holding WisdomTree Emerging Markets or give up 5.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree China ex State Owne vs. WisdomTree Emerging Markets
Performance |
| Timeline |
| WisdomTree China |
| WisdomTree Emerging |
WisdomTree China and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree China and WisdomTree Emerging
The main advantage of trading using opposite WisdomTree China and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree China position performs unexpectedly, WisdomTree Emerging 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 Emerging will offset losses from the drop in WisdomTree Emerging'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 |
| WisdomTree Emerging vs. ABIVAX Socit Anonyme | WisdomTree Emerging vs. HUMANA INC | WisdomTree Emerging vs. SCOR PK | WisdomTree Emerging vs. Aquagold International |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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