Correlation Between SPDR SP and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both SPDR SP and WisdomTree 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 SPDR SP and WisdomTree International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP International and WisdomTree International SmallCap, you can compare the effects of market volatilities on SPDR SP and WisdomTree 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 SPDR SP with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and WisdomTree International.
Diversification Opportunities for SPDR SP and WisdomTree International
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and WisdomTree is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP International and WisdomTree International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and SPDR SP 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 SPDR SP International are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of SPDR SP i.e., SPDR SP and WisdomTree International go up and down completely randomly.
Pair Corralation between SPDR SP and WisdomTree International
Considering the 90-day investment horizon SPDR SP is expected to generate 1.13 times less return on investment than WisdomTree International. But when comparing it to its historical volatility, SPDR SP International is 1.31 times less risky than WisdomTree International. It trades about 0.05 of its potential returns per unit of risk. WisdomTree International SmallCap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,671 in WisdomTree International SmallCap on August 31, 2024 and sell it today you would earn a total of 837.00 from holding WisdomTree International SmallCap or generate 14.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP International vs. WisdomTree International Small
Performance |
| Timeline |
| SPDR SP International |
| WisdomTree International |
SPDR SP and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and WisdomTree International
The main advantage of trading using opposite SPDR SP and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, WisdomTree 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 WisdomTree International will offset losses from the drop in WisdomTree International's long position.| SPDR SP vs. Schwab Fundamental Small | SPDR SP vs. Schwab Fundamental Large | SPDR SP vs. Schwab Fundamental International | SPDR SP vs. Schwab Fundamental Emerging |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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