Correlation Between WisdomTree International and FCF International
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and FCF International 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 FCF International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree International Multifactor and FCF International Quality, you can compare the effects of market volatilities on WisdomTree International and FCF International 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 FCF International. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and FCF International.
Diversification Opportunities for WisdomTree International and FCF International
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and FCF is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Multi and FCF International Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FCF International Quality 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 Multifactor are associated (or correlated) with FCF International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FCF International Quality has no effect on the direction of WisdomTree International i.e., WisdomTree International and FCF International go up and down completely randomly.
Pair Corralation between WisdomTree International and FCF International
Given the investment horizon of 90 days WisdomTree International Multifactor is expected to generate 0.72 times more return on investment than FCF International. However, WisdomTree International Multifactor is 1.38 times less risky than FCF International. It trades about -0.07 of its potential returns per unit of risk. FCF International Quality is currently generating about -0.15 per unit of risk. If you would invest 2,739 in WisdomTree International Multifactor on August 30, 2024 and sell it today you would lose (24.00) from holding WisdomTree International Multifactor or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Multi vs. FCF International Quality
Performance |
| Timeline |
| WisdomTree International |
| FCF International Quality |
WisdomTree International and FCF International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and FCF International
The main advantage of trading using opposite WisdomTree International and FCF International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, FCF International 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 FCF International will offset losses from the drop in FCF International's long position.The idea behind WisdomTree International Multifactor and FCF International Quality 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.
| FCF International vs. FCF Quality ETF | FCF International vs. PIMCO RAFI Dynamic | FCF International vs. ProShares SP 500 | FCF International vs. Affinity World Leaders |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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