Correlation Between Global X and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and WisdomTree Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X MSCI and WisdomTree Emerging Markets, you can compare the effects of market volatilities on Global X 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 Global X with a short position of WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and WisdomTree Emerging.
Diversification Opportunities for Global X and WisdomTree Emerging
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and WisdomTree is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and Global X 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 Global X MSCI 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 Global X i.e., Global X and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between Global X and WisdomTree Emerging
Given the investment horizon of 90 days Global X is expected to generate 1.0 times less return on investment than WisdomTree Emerging. But when comparing it to its historical volatility, Global X MSCI is 1.11 times less risky than WisdomTree Emerging. It trades about 0.07 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,650 in WisdomTree Emerging Markets on September 12, 2024 and sell it today you would earn a total of 530.20 from holding WisdomTree Emerging Markets or generate 20.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X MSCI vs. WisdomTree Emerging Markets
Performance |
| Timeline |
| Global X MSCI |
| WisdomTree Emerging |
Global X and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and WisdomTree Emerging
The main advantage of trading using opposite Global X and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.| Global X vs. Global X MSCI | Global X vs. Global X Alternative | Global X vs. First Trust Intl | Global X vs. iShares AsiaPacific Dividend |
| WisdomTree Emerging vs. Global X MSCI | WisdomTree Emerging vs. Global X Alternative | WisdomTree Emerging vs. iShares Emerging Markets | WisdomTree Emerging vs. Global X SuperDividend |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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