Correlation Between WisdomTree International and SPDR SP
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and SPDR SP 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 International and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree International SmallCap and SPDR SP International, you can compare the effects of market volatilities on WisdomTree International and SPDR SP 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 International with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and SPDR SP.
Diversification Opportunities for WisdomTree International and SPDR SP
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and SPDR is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Small and SPDR SP International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP International and WisdomTree International 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 International SmallCap are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP International has no effect on the direction of WisdomTree International i.e., WisdomTree International and SPDR SP go up and down completely randomly.
Pair Corralation between WisdomTree International and SPDR SP
Considering the 90-day investment horizon WisdomTree International SmallCap is expected to generate 1.31 times more return on investment than SPDR SP. However, WisdomTree International is 1.31 times more volatile than SPDR SP International. It trades about 0.05 of its potential returns per unit of risk. SPDR SP International is currently generating about 0.05 per unit of risk. If you would invest 5,671 in WisdomTree International SmallCap on August 31, 2024 and sell it today you would earn a total of 837.00 from holding WisdomTree International SmallCap or generate 14.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Small vs. SPDR SP International
Performance |
| Timeline |
| WisdomTree International |
| SPDR SP International |
WisdomTree International and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and SPDR SP
The main advantage of trading using opposite WisdomTree International and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.The idea behind WisdomTree International SmallCap and SPDR SP International 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.
| SPDR SP vs. Schwab Fundamental Small | SPDR SP vs. Schwab Fundamental Large | SPDR SP vs. Schwab Fundamental International | SPDR SP vs. Schwab Fundamental 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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