Correlation Between WisdomTree Europe and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and IShares 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 IShares 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 iShares MSCI Japan, you can compare the effects of market volatilities on WisdomTree Europe and IShares 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and IShares MSCI.
Diversification Opportunities for WisdomTree Europe and IShares MSCI
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WisdomTree and IShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe SmallCap and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Japan has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and IShares MSCI go up and down completely randomly.
Pair Corralation between WisdomTree Europe and IShares MSCI
Considering the 90-day investment horizon WisdomTree Europe SmallCap is expected to generate 0.85 times more return on investment than IShares MSCI. However, WisdomTree Europe SmallCap is 1.17 times less risky than IShares MSCI. It trades about 0.2 of its potential returns per unit of risk. iShares MSCI Japan is currently generating about 0.15 per unit of risk. If you would invest 5,627 in WisdomTree Europe SmallCap on November 3, 2024 and sell it today you would earn a total of 207.00 from holding WisdomTree Europe SmallCap or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe SmallCap vs. iShares MSCI Japan
Performance |
| Timeline |
| WisdomTree Europe |
| iShares MSCI Japan |
WisdomTree Europe and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and IShares MSCI
The main advantage of trading using opposite WisdomTree Europe and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, IShares 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 IShares MSCI will offset losses from the drop in IShares 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 |
| IShares MSCI vs. iShares MSCI South | IShares MSCI vs. iShares MSCI Hong | IShares MSCI vs. iShares MSCI Taiwan | IShares MSCI vs. iShares MSCI Germany |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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