Correlation Between ProShares MSCI and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both ProShares MSCI and WisdomTree 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 ProShares MSCI and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares MSCI Europe and WisdomTree Europe Hedged, you can compare the effects of market volatilities on ProShares MSCI and WisdomTree 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 ProShares MSCI with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares MSCI and WisdomTree Europe.
Diversification Opportunities for ProShares MSCI and WisdomTree Europe
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ProShares and WisdomTree is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding ProShares MSCI Europe and WisdomTree Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Hedged and ProShares MSCI 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 ProShares MSCI Europe are associated (or correlated) with WisdomTree Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Hedged has no effect on the direction of ProShares MSCI i.e., ProShares MSCI and WisdomTree Europe go up and down completely randomly.
Pair Corralation between ProShares MSCI and WisdomTree Europe
Given the investment horizon of 90 days ProShares MSCI Europe is expected to under-perform the WisdomTree Europe. In addition to that, ProShares MSCI is 1.11 times more volatile than WisdomTree Europe Hedged. It trades about -0.23 of its total potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about -0.11 per unit of volatility. If you would invest 3,871 in WisdomTree Europe Hedged on August 28, 2024 and sell it today you would lose (72.00) from holding WisdomTree Europe Hedged or give up 1.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares MSCI Europe vs. WisdomTree Europe Hedged
Performance |
| Timeline |
| ProShares MSCI Europe |
| WisdomTree Europe Hedged |
ProShares MSCI and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares MSCI and WisdomTree Europe
The main advantage of trading using opposite ProShares MSCI and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares MSCI position performs unexpectedly, WisdomTree 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 WisdomTree Europe will offset losses from the drop in WisdomTree Europe's long position.| ProShares MSCI vs. ProShares MSCI EAFE | ProShares MSCI vs. ProShares MSCI Emerging | ProShares MSCI vs. ProShares SP MidCap | ProShares MSCI vs. ProShares Russell 2000 |
| WisdomTree Europe vs. WisdomTree International Hedged | WisdomTree Europe vs. WisdomTree Emerging Markets | WisdomTree 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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