Correlation Between WisdomTree Global and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree Global and First Trust 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 First Trust 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 First Trust International, you can compare the effects of market volatilities on WisdomTree Global and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Global and First Trust.
Diversification Opportunities for WisdomTree Global and First Trust
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Global ex US and First Trust International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust International 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust International has no effect on the direction of WisdomTree Global i.e., WisdomTree Global and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree Global and First Trust
Considering the 90-day investment horizon WisdomTree Global is expected to generate 1.76 times less return on investment than First Trust. In addition to that, WisdomTree Global is 1.21 times more volatile than First Trust International. It trades about 0.02 of its total potential returns per unit of risk. First Trust International is currently generating about 0.05 per unit of volatility. If you would invest 3,094 in First Trust International on August 24, 2024 and sell it today you would earn a total of 415.00 from holding First Trust International or generate 13.41% 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. First Trust International
Performance |
| Timeline |
| WisdomTree Global |
| First Trust International |
WisdomTree Global and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Global and First Trust
The main advantage of trading using opposite WisdomTree Global and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Global position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| WisdomTree Global vs. iShares MSCI Intl | WisdomTree Global vs. iShares Edge MSCI | WisdomTree Global vs. iShares MSCI Emerging | WisdomTree Global vs. iShares MSCI Intl |
| First Trust vs. Freedom Day Dividend | First Trust vs. Davis Select International | First Trust vs. iShares MSCI China | First Trust vs. SmartETFs Dividend Builder |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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