Correlation Between WisdomTree Europe and Essential
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and Essential 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 Essential 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 Essential 40 Stock, you can compare the effects of market volatilities on WisdomTree Europe and Essential 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 Essential. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and Essential.
Diversification Opportunities for WisdomTree Europe and Essential
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and Essential is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe SmallCap and Essential 40 Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential 40 Stock 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 Essential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential 40 Stock has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and Essential go up and down completely randomly.
Pair Corralation between WisdomTree Europe and Essential
Considering the 90-day investment horizon WisdomTree Europe SmallCap is expected to generate 1.27 times more return on investment than Essential. However, WisdomTree Europe is 1.27 times more volatile than Essential 40 Stock. It trades about 0.27 of its potential returns per unit of risk. Essential 40 Stock is currently generating about 0.2 per unit of risk. If you would invest 6,899 in WisdomTree Europe SmallCap on December 2, 2025 and sell it today you would earn a total of 869.00 from holding WisdomTree Europe SmallCap or generate 12.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe SmallCap vs. Essential 40 Stock
Performance |
| Timeline |
| WisdomTree Europe |
| Essential 40 Stock |
WisdomTree Europe and Essential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and Essential
The main advantage of trading using opposite WisdomTree Europe and Essential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, Essential 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 Essential will offset losses from the drop in Essential's long position.| WisdomTree Europe vs. WisdomTree International MidCap | WisdomTree Europe vs. iShares MSCI Turkey | WisdomTree Europe vs. iShares Currency Hedged | WisdomTree Europe vs. iShares MSCI Japan |
| Essential vs. Matthews Emerging Markets | Essential vs. ProShares Ultra SmallCap600 | Essential vs. WBI BullBear Yield | Essential vs. iShares MSCI 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 Stocks Directory module to find actively traded stocks across global markets.
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