Correlation Between WisdomTree Japan and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both WisdomTree Japan and Franklin FTSE 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 Franklin FTSE 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 Franklin FTSE Japan, you can compare the effects of market volatilities on WisdomTree Japan and Franklin FTSE 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 Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Japan and Franklin FTSE.
Diversification Opportunities for WisdomTree Japan and Franklin FTSE
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and Franklin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan SmallCap and Franklin FTSE Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE 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 Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Japan has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and Franklin FTSE go up and down completely randomly.
Pair Corralation between WisdomTree Japan and Franklin FTSE
Considering the 90-day investment horizon WisdomTree Japan is expected to generate 1.04 times less return on investment than Franklin FTSE. But when comparing it to its historical volatility, WisdomTree Japan SmallCap is 1.11 times less risky than Franklin FTSE. It trades about 0.03 of its potential returns per unit of risk. Franklin FTSE Japan is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,767 in Franklin FTSE Japan on November 3, 2024 and sell it today you would earn a total of 144.00 from holding Franklin FTSE Japan or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
WisdomTree Japan SmallCap vs. Franklin FTSE Japan
Performance |
| Timeline |
| WisdomTree Japan SmallCap |
| Franklin FTSE Japan |
WisdomTree Japan and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Japan and Franklin FTSE
The main advantage of trading using opposite WisdomTree Japan and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Japan position performs unexpectedly, Franklin FTSE 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 Franklin FTSE will offset losses from the drop in Franklin FTSE'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 |
| Franklin FTSE vs. JPMorgan BetaBuilders Japan | Franklin FTSE vs. Franklin FTSE South | Franklin FTSE vs. Franklin FTSE United | Franklin FTSE vs. Franklin FTSE 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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