Correlation Between WisdomTree Europe and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and WisdomTree Emerging 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 Europe and WisdomTree Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Europe Equity and WisdomTree Emerging Markets, you can compare the effects of market volatilities on WisdomTree Europe and WisdomTree Emerging 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 Europe with a short position of WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and WisdomTree Emerging.
Diversification Opportunities for WisdomTree Europe and WisdomTree Emerging
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Equity and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and WisdomTree Europe 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 Europe Equity are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between WisdomTree Europe and WisdomTree Emerging
Assuming the 90 days trading horizon WisdomTree Europe Equity is expected to generate 0.31 times more return on investment than WisdomTree Emerging. However, WisdomTree Europe Equity is 3.21 times less risky than WisdomTree Emerging. It trades about 0.45 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about -0.13 per unit of risk. If you would invest 2,029 in WisdomTree Europe Equity on January 4, 2025 and sell it today you would earn a total of 58.00 from holding WisdomTree Europe Equity or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
WisdomTree Europe Equity vs. WisdomTree Emerging Markets
Performance |
| Timeline |
| WisdomTree Europe Equity |
| WisdomTree Emerging |
WisdomTree Europe and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and WisdomTree Emerging
The main advantage of trading using opposite WisdomTree Europe and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, WisdomTree Emerging 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 Emerging will offset losses from the drop in WisdomTree Emerging's long position.| WisdomTree Europe vs. WisdomTree Emerging Markets | ||
| WisdomTree Europe vs. WisdomTree Equity Income | ||
| WisdomTree Europe vs. WisdomTree Battery Solutions | ||
| WisdomTree Europe vs. WisdomTree Quality Dividend |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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