Correlation Between WisdomTree Emerging and FlexShares Emerging
Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and FlexShares Emerging 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 FlexShares Emerging 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 FlexShares Emerging Markets, you can compare the effects of market volatilities on WisdomTree Emerging and FlexShares Emerging 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 FlexShares Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and FlexShares Emerging.
Diversification Opportunities for WisdomTree Emerging and FlexShares Emerging
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and FlexShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and FlexShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Emerging 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 FlexShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Emerging has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and FlexShares Emerging go up and down completely randomly.
Pair Corralation between WisdomTree Emerging and FlexShares Emerging
Considering the 90-day investment horizon WisdomTree Emerging is expected to generate 7.95 times less return on investment than FlexShares Emerging. In addition to that, WisdomTree Emerging is 1.29 times more volatile than FlexShares Emerging Markets. It trades about 0.01 of its total potential returns per unit of risk. FlexShares Emerging Markets is currently generating about 0.06 per unit of volatility. If you would invest 2,441 in FlexShares Emerging Markets on September 1, 2024 and sell it today you would earn a total of 134.00 from holding FlexShares Emerging Markets or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
WisdomTree Emerging Markets vs. FlexShares Emerging Markets
Performance |
| Timeline |
| WisdomTree Emerging |
| FlexShares Emerging |
WisdomTree Emerging and FlexShares Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Emerging and FlexShares Emerging
The main advantage of trading using opposite WisdomTree Emerging and FlexShares Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, FlexShares Emerging 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 FlexShares Emerging will offset losses from the drop in FlexShares Emerging's long position.The idea behind WisdomTree Emerging Markets and FlexShares Emerging Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| FlexShares Emerging vs. Xtrackers MSCI Emerging | FlexShares Emerging vs. FlexShares Morningstar Emerging | FlexShares Emerging vs. First Trust Emerging |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |