Correlation Between IShares MSCI and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and WisdomTree Japan 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 IShares MSCI and WisdomTree Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Japan and WisdomTree Japan SmallCap, you can compare the effects of market volatilities on IShares MSCI and WisdomTree Japan 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 IShares MSCI with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and WisdomTree Japan.
Diversification Opportunities for IShares MSCI and WisdomTree Japan
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and WisdomTree is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Japan and WisdomTree Japan SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan SmallCap and IShares 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 iShares MSCI Japan are associated (or correlated) with WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan SmallCap has no effect on the direction of IShares MSCI i.e., IShares MSCI and WisdomTree Japan go up and down completely randomly.
Pair Corralation between IShares MSCI and WisdomTree Japan
Considering the 90-day investment horizon IShares MSCI is expected to generate 1.05 times less return on investment than WisdomTree Japan. In addition to that, IShares MSCI is 1.08 times more volatile than WisdomTree Japan SmallCap. It trades about 0.05 of its total potential returns per unit of risk. WisdomTree Japan SmallCap is currently generating about 0.06 per unit of volatility. If you would invest 5,824 in WisdomTree Japan SmallCap on August 27, 2024 and sell it today you would earn a total of 1,783 from holding WisdomTree Japan SmallCap or generate 30.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Japan vs. WisdomTree Japan SmallCap
Performance |
| Timeline |
| iShares MSCI Japan |
| WisdomTree Japan SmallCap |
IShares MSCI and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and WisdomTree Japan
The main advantage of trading using opposite IShares MSCI and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, WisdomTree Japan 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 Japan will offset losses from the drop in WisdomTree Japan's long position.| IShares MSCI vs. iShares MSCI South | IShares MSCI vs. iShares MSCI Hong | IShares MSCI vs. iShares MSCI Taiwan | IShares MSCI vs. iShares MSCI Germany |
| WisdomTree Japan vs. iShares MSCI South | WisdomTree Japan vs. iShares MSCI Hong | WisdomTree Japan vs. iShares MSCI Taiwan | WisdomTree Japan vs. iShares MSCI Germany |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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