Correlation Between IShares Core and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both IShares Core 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 IShares Core and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and WisdomTree Europe Equity, you can compare the effects of market volatilities on IShares Core 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 IShares Core with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and WisdomTree Europe.
Diversification Opportunities for IShares Core and WisdomTree Europe
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and WisdomTree is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and WisdomTree Europe Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Equity and IShares Core 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 Core MSCI 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 Equity has no effect on the direction of IShares Core i.e., IShares Core and WisdomTree Europe go up and down completely randomly.
Pair Corralation between IShares Core and WisdomTree Europe
Assuming the 90 days trading horizon iShares Core MSCI is expected to under-perform the WisdomTree Europe. In addition to that, IShares Core is 1.75 times more volatile than WisdomTree Europe Equity. It trades about -0.14 of its total potential returns per unit of risk. WisdomTree Europe Equity is currently generating about -0.12 per unit of volatility. If you would invest 2,277 in WisdomTree Europe Equity on September 2, 2024 and sell it today you would lose (34.00) from holding WisdomTree Europe Equity or give up 1.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core MSCI vs. WisdomTree Europe Equity
Performance |
| Timeline |
| iShares Core MSCI |
| WisdomTree Europe Equity |
IShares Core and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and WisdomTree Europe
The main advantage of trading using opposite IShares Core and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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.| IShares Core vs. iShares Corp Bond | IShares Core vs. iShares Emerging Asia | IShares Core vs. iShares MSCI Global | IShares Core vs. iShares VII PLC |
| WisdomTree Europe vs. iShares Core SP | WisdomTree Europe vs. iShares Core MSCI | WisdomTree Europe vs. Lyxor UCITS Stoxx |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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