Correlation Between WisdomTree Emerging and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging 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 WisdomTree Emerging and WisdomTree International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Emerging Markets and WisdomTree International Multifactor, you can compare the effects of market volatilities on WisdomTree Emerging 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 WisdomTree Emerging with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and WisdomTree International.
Diversification Opportunities for WisdomTree Emerging and WisdomTree International
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and WisdomTree International Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and WisdomTree Emerging 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 WisdomTree Emerging Markets 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 WisdomTree Emerging i.e., WisdomTree Emerging and WisdomTree International go up and down completely randomly.
Pair Corralation between WisdomTree Emerging and WisdomTree International
Given the investment horizon of 90 days WisdomTree Emerging is expected to generate 6.75 times less return on investment than WisdomTree International. In addition to that, WisdomTree Emerging is 1.22 times more volatile than WisdomTree International Multifactor. It trades about 0.04 of its total potential returns per unit of risk. WisdomTree International Multifactor is currently generating about 0.36 per unit of volatility. If you would invest 2,689 in WisdomTree International Multifactor on November 3, 2024 and sell it today you would earn a total of 94.99 from holding WisdomTree International Multifactor or generate 3.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Emerging Markets vs. WisdomTree International Multi
Performance |
| Timeline |
| WisdomTree Emerging |
| WisdomTree International |
WisdomTree Emerging and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Emerging and WisdomTree International
The main advantage of trading using opposite WisdomTree Emerging and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging 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.| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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