Correlation Between WisdomTree Global and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both WisdomTree Global 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 Global 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 Global ex US and iShares MSCI Japan, you can compare the effects of market volatilities on WisdomTree Global 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 Global with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Global and IShares MSCI.
Diversification Opportunities for WisdomTree Global and IShares MSCI
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Global ex US and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan and WisdomTree Global 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 Global ex US 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 Japan has no effect on the direction of WisdomTree Global i.e., WisdomTree Global and IShares MSCI go up and down completely randomly.
Pair Corralation between WisdomTree Global and IShares MSCI
Considering the 90-day investment horizon WisdomTree Global is expected to generate 1.79 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, WisdomTree Global ex US is 1.15 times less risky than IShares MSCI. It trades about 0.03 of its potential returns per unit of risk. iShares MSCI Japan is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,312 in iShares MSCI Japan on August 24, 2024 and sell it today you would earn a total of 1,435 from holding iShares MSCI Japan or generate 27.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Global ex US vs. iShares MSCI Japan
Performance |
| Timeline |
| WisdomTree Global |
| iShares MSCI Japan |
WisdomTree Global and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Global and IShares MSCI
The main advantage of trading using opposite WisdomTree Global and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Global 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 Global vs. WisdomTree Global High | WisdomTree Global vs. WisdomTree International MidCap | WisdomTree Global vs. WisdomTree Japan SmallCap | WisdomTree Global vs. WisdomTree International High |
| IShares MSCI vs. WisdomTree Global ex US | IShares MSCI vs. WisdomTree Europe SmallCap | IShares MSCI vs. WisdomTree International MidCap | IShares MSCI vs. WisdomTree Global High |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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