Correlation Between WisdomTree Europe and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe 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 Europe 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 Europe Quality and WisdomTree International Multifactor, you can compare the effects of market volatilities on WisdomTree Europe 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 Europe with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and WisdomTree International.
Diversification Opportunities for WisdomTree Europe and WisdomTree International
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Quality 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 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 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 Europe i.e., WisdomTree Europe and WisdomTree International go up and down completely randomly.
Pair Corralation between WisdomTree Europe and WisdomTree International
Given the investment horizon of 90 days WisdomTree Europe is expected to generate 2.13 times less return on investment than WisdomTree International. In addition to that, WisdomTree Europe is 1.39 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 0.07 per unit of volatility. If you would invest 2,382 in WisdomTree International Multifactor on September 2, 2024 and sell it today you would earn a total of 357.00 from holding WisdomTree International Multifactor or generate 14.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe Quality vs. WisdomTree International Multi
Performance |
| Timeline |
| WisdomTree Europe Quality |
| WisdomTree International |
WisdomTree Europe and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and WisdomTree International
The main advantage of trading using opposite WisdomTree Europe and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe 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 Europe vs. WisdomTree Europe Hedged | WisdomTree Europe vs. WisdomTree International Hedged | WisdomTree Europe vs. WisdomTree Emerging Markets | WisdomTree Europe vs. ProShares MSCI Europe |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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