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 Hedged and WisdomTree Europe Hedged, 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
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan Hedged and WisdomTree Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Hedged 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 Hedged 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 Hedged 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
Given the investment horizon of 90 days WisdomTree Japan Hedged is expected to generate 1.58 times more return on investment than WisdomTree Europe. However, WisdomTree Japan is 1.58 times more volatile than WisdomTree Europe Hedged. It trades about 0.24 of its potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about 0.23 per unit of risk. If you would invest 4,330 in WisdomTree Japan Hedged on November 5, 2025 and sell it today you would earn a total of 672.00 from holding WisdomTree Japan Hedged or generate 15.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Japan Hedged vs. WisdomTree Europe Hedged
Performance |
| Timeline |
| WisdomTree Japan Hedged |
| WisdomTree Europe Hedged |
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. WisdomTree Europe Hedged | WisdomTree Japan vs. Global X MSCI | WisdomTree Japan vs. iShares Fixed Income | WisdomTree Japan vs. iShares MSCI Global |
| WisdomTree Europe vs. WisdomTree Japan Hedged | WisdomTree Europe vs. iShares MSCI Global | WisdomTree Europe vs. iShares Digital Infrastructure | WisdomTree Europe vs. Knowledge Leaders Developed |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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