Correlation Between WisdomTree Emerging and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and Vanguard 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 Emerging and Vanguard FTSE 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 Vanguard FTSE Europe, you can compare the effects of market volatilities on WisdomTree Emerging and Vanguard 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 Emerging with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and Vanguard FTSE.
Diversification Opportunities for WisdomTree Emerging and Vanguard FTSE
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and Vanguard FTSE Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Europe 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Europe has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and Vanguard FTSE go up and down completely randomly.
Pair Corralation between WisdomTree Emerging and Vanguard FTSE
Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to generate 0.91 times more return on investment than Vanguard FTSE. However, WisdomTree Emerging Markets is 1.09 times less risky than Vanguard FTSE. It trades about -0.18 of its potential returns per unit of risk. Vanguard FTSE Europe is currently generating about -0.32 per unit of risk. If you would invest 2,666 in WisdomTree Emerging Markets on August 27, 2024 and sell it today you would lose (82.00) from holding WisdomTree Emerging Markets or give up 3.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Emerging Markets vs. Vanguard FTSE Europe
Performance |
| Timeline |
| WisdomTree Emerging |
| Vanguard FTSE Europe |
WisdomTree Emerging and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Emerging and Vanguard FTSE
The main advantage of trading using opposite WisdomTree Emerging and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, Vanguard 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE'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 |
| Vanguard FTSE vs. Vanguard FTSE Pacific | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard FTSE All World | Vanguard FTSE vs. Vanguard FTSE Developed |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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