Correlation Between SPDR MSCI and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI 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 SPDR MSCI and WisdomTree Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI Emerging and WisdomTree Emerging Markets, you can compare the effects of market volatilities on SPDR MSCI 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 SPDR MSCI with a short position of WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and WisdomTree Emerging.
Diversification Opportunities for SPDR MSCI and WisdomTree Emerging
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and WisdomTree is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Emerging and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and SPDR MSCI 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 SPDR MSCI Emerging 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 SPDR MSCI i.e., SPDR MSCI and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between SPDR MSCI and WisdomTree Emerging
Given the investment horizon of 90 days SPDR MSCI Emerging is expected to generate 1.79 times more return on investment than WisdomTree Emerging. However, SPDR MSCI is 1.79 times more volatile than WisdomTree Emerging Markets. It trades about 0.05 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about -0.01 per unit of risk. If you would invest 3,273 in SPDR MSCI Emerging on September 12, 2024 and sell it today you would earn a total of 115.00 from holding SPDR MSCI Emerging or generate 3.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI Emerging vs. WisdomTree Emerging Markets
Performance |
| Timeline |
| SPDR MSCI Emerging |
| WisdomTree Emerging |
SPDR MSCI and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and WisdomTree Emerging
The main advantage of trading using opposite SPDR MSCI and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI 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.| SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. SPDR MSCI EAFE | SPDR MSCI vs. SPDR DoubleLine Emerging | SPDR MSCI vs. SPDR MSCI EAFE |
| WisdomTree Emerging vs. WisdomTree International Multifactor | WisdomTree Emerging vs. WisdomTree Europe Quality | WisdomTree Emerging vs. PIMCO RAFI Dynamic | WisdomTree Emerging vs. SPDR MSCI Emerging |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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