Correlation Between WisdomTree Europe and UBS ETF
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and UBS ETF 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 UBS ETF 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 UBS ETF SMIM, you can compare the effects of market volatilities on WisdomTree Europe and UBS ETF 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 UBS ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and UBS ETF.
Diversification Opportunities for WisdomTree Europe and UBS ETF
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and UBS is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Equity and UBS ETF SMIM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETF SMIM 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 UBS ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETF SMIM has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and UBS ETF go up and down completely randomly.
Pair Corralation between WisdomTree Europe and UBS ETF
Assuming the 90 days trading horizon WisdomTree Europe Equity is expected to generate 0.5 times more return on investment than UBS ETF. However, WisdomTree Europe Equity is 2.0 times less risky than UBS ETF. It trades about 0.74 of its potential returns per unit of risk. UBS ETF SMIM is currently generating about 0.09 per unit of risk. If you would invest 1,912 in WisdomTree Europe Equity on November 28, 2024 and sell it today you would earn a total of 105.00 from holding WisdomTree Europe Equity or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
WisdomTree Europe Equity vs. UBS ETF SMIM
Performance |
| Timeline |
| WisdomTree Europe Equity |
| UBS ETF SMIM |
WisdomTree Europe and UBS ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and UBS ETF
The main advantage of trading using opposite WisdomTree Europe and UBS ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, UBS ETF 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 UBS ETF will offset losses from the drop in UBS ETF'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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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