Correlation Between WisdomTree Global and Affinity World
Can any of the company-specific risk be diversified away by investing in both WisdomTree Global and Affinity World 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 Global and Affinity World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Global High and Affinity World Leaders, you can compare the effects of market volatilities on WisdomTree Global and Affinity World 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 Global with a short position of Affinity World. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Global and Affinity World.
Diversification Opportunities for WisdomTree Global and Affinity World
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and Affinity is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Global High and Affinity World Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity World Leaders and WisdomTree Global 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 Global High are associated (or correlated) with Affinity World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity World Leaders has no effect on the direction of WisdomTree Global i.e., WisdomTree Global and Affinity World go up and down completely randomly.
Pair Corralation between WisdomTree Global and Affinity World
Considering the 90-day investment horizon WisdomTree Global is expected to generate 1.66 times less return on investment than Affinity World. But when comparing it to its historical volatility, WisdomTree Global High is 1.23 times less risky than Affinity World. It trades about 0.07 of its potential returns per unit of risk. Affinity World Leaders is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,141 in Affinity World Leaders on November 19, 2024 and sell it today you would earn a total of 1,021 from holding Affinity World Leaders or generate 47.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Global High vs. Affinity World Leaders
Performance |
| Timeline |
| WisdomTree Global High |
| Affinity World Leaders |
WisdomTree Global and Affinity World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Global and Affinity World
The main advantage of trading using opposite WisdomTree Global and Affinity World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Global position performs unexpectedly, Affinity World 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 Affinity World will offset losses from the drop in Affinity World's long position.The idea behind WisdomTree Global High and Affinity World Leaders 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.
| Affinity World vs. American Century STOXX | Affinity World vs. PIMCO RAFI Dynamic | Affinity World vs. ProShares SP 500 |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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