Correlation Between SPDR SP and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Emerging and WisdomTree Europe SmallCap, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and WisdomTree Europe.
Diversification Opportunities for SPDR SP and WisdomTree Europe
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between SPDR and WisdomTree is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Emerging and WisdomTree Europe SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe and SPDR SP 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 SPDR SP Emerging 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 has no effect on the direction of SPDR SP i.e., SPDR SP and WisdomTree Europe go up and down completely randomly.
Pair Corralation between SPDR SP and WisdomTree Europe
Considering the 90-day investment horizon SPDR SP Emerging is expected to generate 0.98 times more return on investment than WisdomTree Europe. However, SPDR SP Emerging is 1.03 times less risky than WisdomTree Europe. It trades about 0.05 of its potential returns per unit of risk. WisdomTree Europe SmallCap is currently generating about 0.01 per unit of risk. If you would invest 5,556 in SPDR SP Emerging on August 27, 2024 and sell it today you would earn a total of 448.00 from holding SPDR SP Emerging or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Emerging vs. WisdomTree Europe SmallCap
Performance |
| Timeline |
| SPDR SP Emerging |
| WisdomTree Europe |
SPDR SP and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and WisdomTree Europe
The main advantage of trading using opposite SPDR SP and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. SPDR SP International | SPDR SP vs. WisdomTree Emerging Markets | SPDR SP vs. SPDR SP Emerging | SPDR SP vs. SPDR SP Emerging |
| WisdomTree Europe vs. WisdomTree Europe Hedged | 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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