Correlation Between Xtrackers MSCI and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI 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 Xtrackers MSCI and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI EAFE and WisdomTree Europe SmallCap, you can compare the effects of market volatilities on Xtrackers MSCI 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 Xtrackers MSCI with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and WisdomTree Europe.
Diversification Opportunities for Xtrackers MSCI and WisdomTree Europe
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Xtrackers and WisdomTree is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI EAFE and WisdomTree Europe SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe and Xtrackers MSCI 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 Xtrackers MSCI EAFE 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 has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and WisdomTree Europe go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and WisdomTree Europe
Given the investment horizon of 90 days Xtrackers MSCI EAFE is expected to under-perform the WisdomTree Europe. In addition to that, Xtrackers MSCI is 1.08 times more volatile than WisdomTree Europe SmallCap. It trades about -0.17 of its total potential returns per unit of risk. WisdomTree Europe SmallCap is currently generating about -0.01 per unit of volatility. If you would invest 6,213 in WisdomTree Europe SmallCap on January 21, 2025 and sell it today you would lose (56.00) from holding WisdomTree Europe SmallCap or give up 0.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers MSCI EAFE vs. WisdomTree Europe SmallCap
Performance |
| Timeline |
| Xtrackers MSCI EAFE |
| WisdomTree Europe |
Xtrackers MSCI and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and WisdomTree Europe
The main advantage of trading using opposite Xtrackers MSCI and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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.| Xtrackers MSCI vs. Xtrackers MSCI Europe | Xtrackers MSCI vs. Xtrackers MSCI Japan | Xtrackers MSCI vs. iShares Currency Hedged | Xtrackers MSCI vs. WisdomTree Europe Hedged |
| WisdomTree Europe vs. WisdomTree International MidCap | WisdomTree Europe vs. WisdomTree Global High | WisdomTree Europe vs. WisdomTree International SmallCap | WisdomTree Europe vs. WisdomTree Japan SmallCap |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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