Correlation Between WisdomTree Japan and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both WisdomTree Japan and WisdomTree Europe 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 Japan and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Japan Equity and WisdomTree Europe Equity, you can compare the effects of market volatilities on WisdomTree Japan and WisdomTree Europe 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 Japan with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Japan and WisdomTree Europe.
Diversification Opportunities for WisdomTree Japan and WisdomTree Europe
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between WisdomTree and WisdomTree is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan Equity and WisdomTree Europe Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Equity and WisdomTree Japan 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 Japan Equity are associated (or correlated) with WisdomTree Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Equity has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and WisdomTree Europe go up and down completely randomly.
Pair Corralation between WisdomTree Japan and WisdomTree Europe
Assuming the 90 days trading horizon WisdomTree Japan Equity is expected to generate 1.97 times more return on investment than WisdomTree Europe. However, WisdomTree Japan is 1.97 times more volatile than WisdomTree Europe Equity. It trades about 0.09 of its potential returns per unit of risk. WisdomTree Europe Equity is currently generating about 0.02 per unit of risk. If you would invest 2,516 in WisdomTree Japan Equity on September 12, 2024 and sell it today you would earn a total of 875.00 from holding WisdomTree Japan Equity or generate 34.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 70.54% |
| Values | Daily Returns |
WisdomTree Japan Equity vs. WisdomTree Europe Equity
Performance |
| Timeline |
| WisdomTree Japan Equity |
| WisdomTree Europe Equity |
WisdomTree Japan and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Japan and WisdomTree Europe
The main advantage of trading using opposite WisdomTree Japan and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Japan position performs unexpectedly, WisdomTree Europe 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 Europe will offset losses from the drop in WisdomTree Europe's long position.| WisdomTree Japan vs. Baloise Holding AG | WisdomTree Japan vs. 21Shares Polkadot ETP | WisdomTree Japan vs. UBS ETF MSCI | WisdomTree Japan vs. BB Biotech AG |
| WisdomTree Europe vs. Baloise Holding AG | WisdomTree Europe vs. 21Shares Polkadot ETP | WisdomTree Europe vs. UBS ETF MSCI | WisdomTree Europe vs. BB Biotech AG |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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