Correlation Between WisdomTree International and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and IShares MSCI 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 IShares MSCI 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 iShares MSCI EAFE, you can compare the effects of market volatilities on WisdomTree International and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and IShares MSCI.
Diversification Opportunities for WisdomTree International and IShares MSCI
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Small and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of WisdomTree International i.e., WisdomTree International and IShares MSCI go up and down completely randomly.
Pair Corralation between WisdomTree International and IShares MSCI
Considering the 90-day investment horizon WisdomTree International SmallCap is expected to generate 0.94 times more return on investment than IShares MSCI. However, WisdomTree International SmallCap is 1.07 times less risky than IShares MSCI. It trades about 0.03 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about -0.01 per unit of risk. If you would invest 6,151 in WisdomTree International SmallCap on August 27, 2024 and sell it today you would earn a total of 241.00 from holding WisdomTree International SmallCap or generate 3.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Small vs. iShares MSCI EAFE
Performance |
| Timeline |
| WisdomTree International |
| iShares MSCI EAFE |
WisdomTree International and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and IShares MSCI
The main advantage of trading using opposite WisdomTree International and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.| WisdomTree International vs. Schwab Fundamental International | WisdomTree International vs. Schwab Fundamental Emerging | WisdomTree International vs. Schwab International Small Cap |
| IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares Russell Mid Cap | IShares MSCI vs. iShares MSCI Netherlands |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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