Correlation Between WisdomTree Europe and OShares Europe
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and OShares 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 WisdomTree Europe and OShares Europe 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 OShares Europe Quality, you can compare the effects of market volatilities on WisdomTree Europe and OShares 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 WisdomTree Europe with a short position of OShares Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and OShares Europe.
Diversification Opportunities for WisdomTree Europe and OShares Europe
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between WisdomTree and OShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Quality and OShares Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OShares Europe Quality 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 OShares Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OShares Europe Quality has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and OShares Europe go up and down completely randomly.
Pair Corralation between WisdomTree Europe and OShares Europe
Given the investment horizon of 90 days WisdomTree Europe Quality is expected to under-perform the OShares Europe. In addition to that, WisdomTree Europe is 1.01 times more volatile than OShares Europe Quality. It trades about -0.4 of its total potential returns per unit of risk. OShares Europe Quality is currently generating about -0.33 per unit of volatility. If you would invest 3,083 in OShares Europe Quality on August 29, 2024 and sell it today you would lose (198.00) from holding OShares Europe Quality or give up 6.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe Quality vs. OShares Europe Quality
Performance |
| Timeline |
| WisdomTree Europe Quality |
| OShares Europe Quality |
WisdomTree Europe and OShares Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and OShares Europe
The main advantage of trading using opposite WisdomTree Europe and OShares Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, OShares 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 OShares Europe will offset losses from the drop in OShares Europe'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 |
| OShares Europe vs. WisdomTree International Hedged | OShares Europe vs. WisdomTree Emerging Markets | OShares Europe vs. WisdomTree Dynamic Currency |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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