Correlation Between WisdomTree Emerging and EA Series
Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and EA Series 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 EA Series 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 EA Series Trust, you can compare the effects of market volatilities on WisdomTree Emerging and EA Series 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 EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and EA Series.
Diversification Opportunities for WisdomTree Emerging and EA Series
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and STXE is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and EA Series go up and down completely randomly.
Pair Corralation between WisdomTree Emerging and EA Series
Considering the 90-day investment horizon WisdomTree Emerging is expected to generate 3.34 times less return on investment than EA Series. But when comparing it to its historical volatility, WisdomTree Emerging Markets is 1.08 times less risky than EA Series. It trades about 0.01 of its potential returns per unit of risk. EA Series Trust is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,840 in EA Series Trust on September 1, 2024 and sell it today you would earn a total of 51.00 from holding EA Series Trust or generate 1.8% 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. EA Series Trust
Performance |
| Timeline |
| WisdomTree Emerging |
| EA Series Trust |
WisdomTree Emerging and EA Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Emerging and EA Series
The main advantage of trading using opposite WisdomTree Emerging and EA Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, EA Series 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 EA Series will offset losses from the drop in EA Series' long position.The idea behind WisdomTree Emerging Markets and EA Series Trust 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.
| EA Series vs. Xtrackers MSCI Emerging | EA Series vs. FlexShares Morningstar Emerging | EA Series 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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