Correlation Between SPDR MSCI and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and WisdomTree Europe 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 Europe 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 Europe Quality, you can compare the effects of market volatilities on SPDR MSCI and WisdomTree Europe 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 Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and WisdomTree Europe.
Diversification Opportunities for SPDR MSCI and WisdomTree Europe
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SPDR and WisdomTree is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Emerging and WisdomTree Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Quality 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 Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Quality has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and WisdomTree Europe go up and down completely randomly.
Pair Corralation between SPDR MSCI and WisdomTree Europe
Given the investment horizon of 90 days SPDR MSCI Emerging is expected to generate 1.07 times more return on investment than WisdomTree Europe. However, SPDR MSCI is 1.07 times more volatile than WisdomTree Europe Quality. It trades about -0.14 of its potential returns per unit of risk. WisdomTree Europe Quality is currently generating about -0.18 per unit of risk. If you would invest 3,450 in SPDR MSCI Emerging on September 4, 2024 and sell it today you would lose (105.00) from holding SPDR MSCI Emerging or give up 3.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI Emerging vs. WisdomTree Europe Quality
Performance |
| Timeline |
| SPDR MSCI Emerging |
| WisdomTree Europe Quality |
SPDR MSCI and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and WisdomTree Europe
The main advantage of trading using opposite SPDR MSCI and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, WisdomTree Europe 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 Europe will offset losses from the drop in WisdomTree Europe'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 Europe vs. Vanguard FTSE Pacific | WisdomTree Europe vs. Vanguard FTSE Emerging | WisdomTree Europe vs. Vanguard FTSE All World | WisdomTree Europe vs. Vanguard FTSE Developed |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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