Correlation Between WisdomTree Europe and Lyxor SMI
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and Lyxor SMI 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 Lyxor SMI 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 Lyxor SMI Daily, you can compare the effects of market volatilities on WisdomTree Europe and Lyxor SMI 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 Lyxor SMI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and Lyxor SMI.
Diversification Opportunities for WisdomTree Europe and Lyxor SMI
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between WisdomTree and Lyxor is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Equity and Lyxor SMI Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor SMI Daily 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 Lyxor SMI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor SMI Daily has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and Lyxor SMI go up and down completely randomly.
Pair Corralation between WisdomTree Europe and Lyxor SMI
Assuming the 90 days trading horizon WisdomTree Europe Equity is expected to generate 0.39 times more return on investment than Lyxor SMI. However, WisdomTree Europe Equity is 2.54 times less risky than Lyxor SMI. It trades about 0.05 of its potential returns per unit of risk. Lyxor SMI Daily is currently generating about -0.01 per unit of risk. If you would invest 1,694 in WisdomTree Europe Equity on August 31, 2024 and sell it today you would earn a total of 173.00 from holding WisdomTree Europe Equity or generate 10.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
WisdomTree Europe Equity vs. Lyxor SMI Daily
Performance |
| Timeline |
| WisdomTree Europe Equity |
| Lyxor SMI Daily |
WisdomTree Europe and Lyxor SMI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and Lyxor SMI
The main advantage of trading using opposite WisdomTree Europe and Lyxor SMI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, Lyxor SMI 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 Lyxor SMI will offset losses from the drop in Lyxor SMI's long position.| WisdomTree Europe vs. iShares Core SP | WisdomTree Europe vs. iShares Core MSCI | WisdomTree Europe vs. Lyxor UCITS Stoxx |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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