Correlation Between WisdomTree Europe and Xtrackers FTSE
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and Xtrackers FTSE 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 Europe and Xtrackers FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Europe Quality and Xtrackers FTSE Developed, you can compare the effects of market volatilities on WisdomTree Europe and Xtrackers FTSE 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 Europe with a short position of Xtrackers FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and Xtrackers FTSE.
Diversification Opportunities for WisdomTree Europe and Xtrackers FTSE
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and Xtrackers is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Quality and Xtrackers FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE Developed and WisdomTree Europe 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 Europe Quality are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE Developed has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and Xtrackers FTSE go up and down completely randomly.
Pair Corralation between WisdomTree Europe and Xtrackers FTSE
Given the investment horizon of 90 days WisdomTree Europe Quality is expected to generate 0.95 times more return on investment than Xtrackers FTSE. However, WisdomTree Europe Quality is 1.05 times less risky than Xtrackers FTSE. It trades about 0.16 of its potential returns per unit of risk. Xtrackers FTSE Developed is currently generating about 0.03 per unit of risk. If you would invest 2,995 in WisdomTree Europe Quality on October 23, 2024 and sell it today you would earn a total of 52.00 from holding WisdomTree Europe Quality or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe Quality vs. Xtrackers FTSE Developed
Performance |
| Timeline |
| WisdomTree Europe Quality |
| Xtrackers FTSE Developed |
WisdomTree Europe and Xtrackers FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and Xtrackers FTSE
The main advantage of trading using opposite WisdomTree Europe and Xtrackers FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, Xtrackers FTSE 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 Xtrackers FTSE will offset losses from the drop in Xtrackers FTSE's long position.| WisdomTree Europe vs. WisdomTree Europe Hedged | WisdomTree Europe vs. WisdomTree International Hedged | WisdomTree Europe vs. WisdomTree Emerging Markets | WisdomTree Europe vs. ProShares MSCI Europe |
| Xtrackers FTSE vs. Xtrackers Russell Multifactor | Xtrackers FTSE vs. Xtrackers MSCI All | Xtrackers FTSE vs. WisdomTree Dynamic Currency | Xtrackers FTSE vs. Xtrackers MSCI Eurozone |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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