Correlation Between WisdomTree International and Invesco RAFI
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and Invesco RAFI 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 Invesco RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree International LargeCap and Invesco RAFI Strategic, you can compare the effects of market volatilities on WisdomTree International and Invesco RAFI 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 Invesco RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and Invesco RAFI.
Diversification Opportunities for WisdomTree International and Invesco RAFI
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Large and Invesco RAFI Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco RAFI Strategic 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 LargeCap are associated (or correlated) with Invesco RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco RAFI Strategic has no effect on the direction of WisdomTree International i.e., WisdomTree International and Invesco RAFI go up and down completely randomly.
Pair Corralation between WisdomTree International and Invesco RAFI
Considering the 90-day investment horizon WisdomTree International is expected to generate 1.11 times less return on investment than Invesco RAFI. In addition to that, WisdomTree International is 1.11 times more volatile than Invesco RAFI Strategic. It trades about 0.13 of its total potential returns per unit of risk. Invesco RAFI Strategic is currently generating about 0.16 per unit of volatility. If you would invest 5,111 in Invesco RAFI Strategic on September 26, 2025 and sell it today you would earn a total of 649.00 from holding Invesco RAFI Strategic or generate 12.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Large vs. Invesco RAFI Strategic
Performance |
| Timeline |
| WisdomTree International |
| Invesco RAFI Strategic |
WisdomTree International and Invesco RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and Invesco RAFI
The main advantage of trading using opposite WisdomTree International and Invesco RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, Invesco RAFI 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 Invesco RAFI will offset losses from the drop in Invesco RAFI's long position.The idea behind WisdomTree International LargeCap and Invesco RAFI Strategic 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.
| Invesco RAFI vs. Invesco Russell 1000 | Invesco RAFI vs. Invesco SP 500 | Invesco RAFI vs. iShares Core Conservative | Invesco RAFI vs. Xtrackers MSCI Europe |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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