Correlation Between WisdomTree Japan and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both WisdomTree Japan and WisdomTree Europe 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 Europe 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 Europe Hedged, you can compare the effects of market volatilities on WisdomTree Japan and WisdomTree Europe 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 Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Japan and WisdomTree Europe.
Diversification Opportunities for WisdomTree Japan and WisdomTree Europe
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan SmallCap and WisdomTree Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Hedged 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 Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Hedged has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and WisdomTree Europe go up and down completely randomly.
Pair Corralation between WisdomTree Japan and WisdomTree Europe
Considering the 90-day investment horizon WisdomTree Japan is expected to generate 3.26 times less return on investment than WisdomTree Europe. In addition to that, WisdomTree Japan is 1.34 times more volatile than WisdomTree Europe Hedged. It trades about 0.15 of its total potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about 0.65 per unit of volatility. If you would invest 4,375 in WisdomTree Europe Hedged on November 3, 2024 and sell it today you would earn a total of 366.00 from holding WisdomTree Europe Hedged or generate 8.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
WisdomTree Japan SmallCap vs. WisdomTree Europe Hedged
Performance |
| Timeline |
| WisdomTree Japan SmallCap |
| WisdomTree Europe Hedged |
WisdomTree Japan and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Japan and WisdomTree Europe
The main advantage of trading using opposite WisdomTree Japan and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Japan position performs unexpectedly, WisdomTree Europe 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 Europe will offset losses from the drop in WisdomTree Europe'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 |
| WisdomTree Europe vs. WisdomTree Japan Hedged | WisdomTree Europe vs. WisdomTree Europe SmallCap | WisdomTree Europe vs. Xtrackers MSCI EAFE | WisdomTree Europe vs. SPDR EURO STOXX |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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