Correlation Between WisdomTree Emerging and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and First Trust 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 Emerging and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Emerging Markets and First Trust Germany, you can compare the effects of market volatilities on WisdomTree Emerging and First Trust 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 Emerging with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and First Trust.
Diversification Opportunities for WisdomTree Emerging and First Trust
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and First is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and First Trust Germany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Germany and WisdomTree Emerging 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 Emerging Markets are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Germany has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree Emerging and First Trust
Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Emerging Markets is 1.42 times less risky than First Trust. The etf trades about -0.12 of its potential returns per unit of risk. The First Trust Germany is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,845 in First Trust Germany on September 1, 2024 and sell it today you would earn a total of 17.00 from holding First Trust Germany or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Emerging Markets vs. First Trust Germany
Performance |
| Timeline |
| WisdomTree Emerging |
| First Trust Germany |
WisdomTree Emerging and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Emerging and First Trust
The main advantage of trading using opposite WisdomTree Emerging and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| WisdomTree Emerging vs. WisdomTree SmallCap Quality | WisdomTree Emerging vs. WisdomTree Japan Hedged | WisdomTree Emerging vs. WisdomTree Interest Rate | WisdomTree Emerging vs. WisdomTree Emerging Markets |
| First Trust vs. First Trust Switzerland | First Trust vs. First Trust United | First Trust vs. First Trust Japan | First Trust vs. First Trust Latin |
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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