Correlation Between WisdomTree Japan and WisdomTree Global
Can any of the company-specific risk be diversified away by investing in both WisdomTree Japan and WisdomTree Global 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 Japan and WisdomTree Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Japan SmallCap and WisdomTree Global ex US, you can compare the effects of market volatilities on WisdomTree Japan and WisdomTree Global 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 Japan with a short position of WisdomTree Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Japan and WisdomTree Global.
Diversification Opportunities for WisdomTree Japan and WisdomTree Global
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan SmallCap and WisdomTree Global ex US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Global and WisdomTree Japan 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 Japan SmallCap are associated (or correlated) with WisdomTree Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Global has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and WisdomTree Global go up and down completely randomly.
Pair Corralation between WisdomTree Japan and WisdomTree Global
Considering the 90-day investment horizon WisdomTree Japan SmallCap is expected to generate 0.81 times more return on investment than WisdomTree Global. However, WisdomTree Japan SmallCap is 1.23 times less risky than WisdomTree Global. It trades about 0.15 of its potential returns per unit of risk. WisdomTree Global ex US is currently generating about -0.16 per unit of risk. If you would invest 7,436 in WisdomTree Japan SmallCap on August 27, 2024 and sell it today you would earn a total of 165.00 from holding WisdomTree Japan SmallCap or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Japan SmallCap vs. WisdomTree Global ex US
Performance |
| Timeline |
| WisdomTree Japan SmallCap |
| WisdomTree Global |
WisdomTree Japan and WisdomTree Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Japan and WisdomTree Global
The main advantage of trading using opposite WisdomTree Japan and WisdomTree Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Japan position performs unexpectedly, WisdomTree Global 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 Global will offset losses from the drop in WisdomTree Global's long position.| WisdomTree Japan vs. iShares MSCI South | WisdomTree Japan vs. iShares MSCI Hong | WisdomTree Japan vs. iShares MSCI Taiwan | WisdomTree Japan vs. iShares MSCI Germany |
| WisdomTree Global vs. WisdomTree Global High | WisdomTree Global vs. WisdomTree International MidCap | WisdomTree Global vs. WisdomTree Japan SmallCap | WisdomTree Global vs. WisdomTree International High |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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