Correlation Between WisdomTree Japan and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both WisdomTree Japan 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 Japan 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 Japan SmallCap and iShares MSCI Japan, you can compare the effects of market volatilities on WisdomTree Japan 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 Japan with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Japan and IShares MSCI.
Diversification Opportunities for WisdomTree Japan and IShares MSCI
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan 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 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 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 Japan i.e., WisdomTree Japan and IShares MSCI go up and down completely randomly.
Pair Corralation between WisdomTree Japan and IShares MSCI
Considering the 90-day investment horizon WisdomTree Japan is expected to generate 1.02 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, WisdomTree Japan SmallCap is 1.08 times less risky than IShares MSCI. It trades about 0.14 of its potential returns per unit of risk. iShares MSCI Japan is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,124 in iShares MSCI Japan on August 28, 2024 and sell it today you would earn a total of 67.00 from holding iShares MSCI Japan or generate 2.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
WisdomTree Japan SmallCap vs. iShares MSCI Japan
Performance |
| Timeline |
| WisdomTree Japan SmallCap |
| iShares MSCI Japan |
WisdomTree Japan and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Japan and IShares MSCI
The main advantage of trading using opposite WisdomTree Japan and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Japan 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 Japan vs. WisdomTree Global ex US | WisdomTree Japan vs. WisdomTree Europe SmallCap | WisdomTree Japan vs. WisdomTree International MidCap | WisdomTree Japan vs. WisdomTree Global High |
| 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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