Correlation Between WisdomTree Europe and IShares Edge
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and IShares Edge 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 IShares Edge 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 iShares Edge MSCI, you can compare the effects of market volatilities on WisdomTree Europe and IShares Edge 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 IShares Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and IShares Edge.
Diversification Opportunities for WisdomTree Europe and IShares Edge
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between WisdomTree and IShares is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Equity and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI 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 IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and IShares Edge go up and down completely randomly.
Pair Corralation between WisdomTree Europe and IShares Edge
Assuming the 90 days trading horizon WisdomTree Europe Equity is expected to under-perform the IShares Edge. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Europe Equity is 2.07 times less risky than IShares Edge. The etf trades about -0.19 of its potential returns per unit of risk. The iShares Edge MSCI is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 726.00 in iShares Edge MSCI on August 30, 2024 and sell it today you would earn a total of 40.00 from holding iShares Edge MSCI or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe Equity vs. iShares Edge MSCI
Performance |
| Timeline |
| WisdomTree Europe Equity |
| iShares Edge MSCI |
WisdomTree Europe and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and IShares Edge
The main advantage of trading using opposite WisdomTree Europe and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, IShares Edge 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 IShares Edge will offset losses from the drop in IShares Edge's long position.| WisdomTree Europe vs. UBSFund Solutions MSCI | WisdomTree Europe vs. iShares Core SP | WisdomTree Europe vs. Baloise Holding AG | WisdomTree Europe vs. Autoneum Holding AG |
| IShares Edge vs. UBSFund Solutions MSCI | IShares Edge vs. iShares Core SP | IShares Edge vs. Baloise Holding AG | IShares Edge vs. Autoneum Holding 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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