Correlation Between WisdomTree Europe and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and SPDR MSCI 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 SPDR MSCI 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 SPDR MSCI Emerging, you can compare the effects of market volatilities on WisdomTree Europe and SPDR MSCI 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 SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and SPDR MSCI.
Diversification Opportunities for WisdomTree Europe and SPDR MSCI
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WisdomTree and SPDR is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Quality and SPDR MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Emerging 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Emerging has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and SPDR MSCI go up and down completely randomly.
Pair Corralation between WisdomTree Europe and SPDR MSCI
Given the investment horizon of 90 days WisdomTree Europe Quality is expected to under-perform the SPDR MSCI. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Europe Quality is 1.07 times less risky than SPDR MSCI. The etf trades about -0.18 of its potential returns per unit of risk. The SPDR MSCI Emerging is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 3,450 in SPDR MSCI Emerging on September 4, 2024 and sell it today you would lose (105.00) from holding SPDR MSCI Emerging or give up 3.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe Quality vs. SPDR MSCI Emerging
Performance |
| Timeline |
| WisdomTree Europe Quality |
| SPDR MSCI Emerging |
WisdomTree Europe and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and SPDR MSCI
The main advantage of trading using opposite WisdomTree Europe and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, SPDR MSCI 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 SPDR MSCI will offset losses from the drop in SPDR MSCI's long position.| WisdomTree Europe vs. Vanguard FTSE Pacific | WisdomTree Europe vs. Vanguard FTSE Emerging | WisdomTree Europe vs. Vanguard FTSE All World | WisdomTree Europe vs. Vanguard FTSE Developed |
| SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. SPDR MSCI EAFE | SPDR MSCI vs. SPDR DoubleLine Emerging | SPDR MSCI vs. SPDR MSCI EAFE |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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