Correlation Between IShares MSCI and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and WisdomTree International 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 IShares MSCI and WisdomTree International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI EAFE and WisdomTree International Multifactor, you can compare the effects of market volatilities on IShares MSCI and WisdomTree International 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 IShares MSCI with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and WisdomTree International.
Diversification Opportunities for IShares MSCI and WisdomTree International
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and WisdomTree is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and WisdomTree International Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and IShares 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 iShares MSCI EAFE are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of IShares MSCI i.e., IShares MSCI and WisdomTree International go up and down completely randomly.
Pair Corralation between IShares MSCI and WisdomTree International
Considering the 90-day investment horizon IShares MSCI is expected to generate 2.24 times less return on investment than WisdomTree International. In addition to that, IShares MSCI is 1.25 times more volatile than WisdomTree International Multifactor. It trades about 0.02 of its total potential returns per unit of risk. WisdomTree International Multifactor is currently generating about 0.06 per unit of volatility. If you would invest 2,633 in WisdomTree International Multifactor on September 5, 2024 and sell it today you would earn a total of 122.00 from holding WisdomTree International Multifactor or generate 4.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
iShares MSCI EAFE vs. WisdomTree International Multi
Performance |
| Timeline |
| iShares MSCI EAFE |
| WisdomTree International |
IShares MSCI and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and WisdomTree International
The main advantage of trading using opposite IShares MSCI and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, WisdomTree International 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 International will offset losses from the drop in WisdomTree International's long position.The idea behind iShares MSCI EAFE and WisdomTree International Multifactor pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| WisdomTree International vs. iShares MSCI EAFE | WisdomTree International vs. Vanguard International High | WisdomTree International vs. iShares International Select |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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