Correlation Between WisdomTree Europe and IShares Currency
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and IShares Currency 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 IShares Currency into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Europe Hedged and iShares Currency Hedged, you can compare the effects of market volatilities on WisdomTree Europe and IShares Currency 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 IShares Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and IShares Currency.
Diversification Opportunities for WisdomTree Europe and IShares Currency
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Hedged and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged 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 Hedged are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and IShares Currency go up and down completely randomly.
Pair Corralation between WisdomTree Europe and IShares Currency
Given the investment horizon of 90 days WisdomTree Europe Hedged is expected to under-perform the IShares Currency. In addition to that, WisdomTree Europe is 1.25 times more volatile than iShares Currency Hedged. It trades about -0.11 of its total potential returns per unit of risk. iShares Currency Hedged is currently generating about -0.07 per unit of volatility. If you would invest 3,548 in iShares Currency Hedged on August 28, 2024 and sell it today you would lose (34.00) from holding iShares Currency Hedged or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe Hedged vs. iShares Currency Hedged
Performance |
| Timeline |
| WisdomTree Europe Hedged |
| iShares Currency Hedged |
WisdomTree Europe and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and IShares Currency
The main advantage of trading using opposite WisdomTree Europe and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, IShares Currency 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 IShares Currency will offset losses from the drop in IShares Currency's long position.| WisdomTree Europe vs. WisdomTree International Hedged | WisdomTree Europe vs. WisdomTree Emerging Markets | WisdomTree Europe vs. WisdomTree Dynamic Currency |
| IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. Xtrackers 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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