Correlation Between WisdomTree Europe and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and Xtrackers MSCI 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 Europe and Xtrackers MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Europe SmallCap and Xtrackers MSCI EAFE, you can compare the effects of market volatilities on WisdomTree Europe and Xtrackers MSCI 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 Europe with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and Xtrackers MSCI.
Diversification Opportunities for WisdomTree Europe and Xtrackers MSCI
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between WisdomTree and Xtrackers is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe SmallCap and Xtrackers MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI EAFE and WisdomTree Europe 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 Europe SmallCap are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI EAFE has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between WisdomTree Europe and Xtrackers MSCI
Considering the 90-day investment horizon WisdomTree Europe is expected to generate 1.89 times less return on investment than Xtrackers MSCI. In addition to that, WisdomTree Europe is 1.47 times more volatile than Xtrackers MSCI EAFE. It trades about 0.03 of its total potential returns per unit of risk. Xtrackers MSCI EAFE is currently generating about 0.08 per unit of volatility. If you would invest 3,137 in Xtrackers MSCI EAFE on August 29, 2024 and sell it today you would earn a total of 1,011 from holding Xtrackers MSCI EAFE or generate 32.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe SmallCap vs. Xtrackers MSCI EAFE
Performance |
| Timeline |
| WisdomTree Europe |
| Xtrackers MSCI EAFE |
WisdomTree Europe and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and Xtrackers MSCI
The main advantage of trading using opposite WisdomTree Europe and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, Xtrackers MSCI 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 Xtrackers MSCI will offset losses from the drop in Xtrackers MSCI's long position.| WisdomTree Europe vs. WisdomTree International MidCap | WisdomTree Europe vs. WisdomTree Global High | WisdomTree Europe vs. WisdomTree International SmallCap | WisdomTree Europe vs. WisdomTree Japan SmallCap |
| Xtrackers MSCI vs. Dimensional Core Equity | Xtrackers MSCI vs. Dimensional Emerging Core | Xtrackers MSCI vs. Dimensional Targeted Value | Xtrackers MSCI vs. Dimensional Small Cap |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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