Correlation Between SPDR EURO and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both SPDR EURO 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 EURO 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 EURO STOXX and WisdomTree Europe SmallCap, you can compare the effects of market volatilities on SPDR EURO 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 EURO with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR EURO and WisdomTree Europe.
Diversification Opportunities for SPDR EURO and WisdomTree Europe
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and WisdomTree is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SPDR EURO STOXX 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 EURO 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 EURO STOXX 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 EURO i.e., SPDR EURO and WisdomTree Europe go up and down completely randomly.
Pair Corralation between SPDR EURO and WisdomTree Europe
Considering the 90-day investment horizon SPDR EURO STOXX is expected to under-perform the WisdomTree Europe. In addition to that, SPDR EURO is 1.12 times more volatile than WisdomTree Europe SmallCap. It trades about -0.28 of its total potential returns per unit of risk. WisdomTree Europe SmallCap is currently generating about -0.23 per unit of volatility. If you would invest 6,009 in WisdomTree Europe SmallCap on August 25, 2024 and sell it today you would lose (291.00) from holding WisdomTree Europe SmallCap or give up 4.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR EURO STOXX vs. WisdomTree Europe SmallCap
Performance |
| Timeline |
| SPDR EURO STOXX |
| WisdomTree Europe |
SPDR EURO and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR EURO and WisdomTree Europe
The main advantage of trading using opposite SPDR EURO and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR EURO 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 EURO vs. WisdomTree Europe Hedged | SPDR EURO vs. WisdomTree International Hedged | SPDR EURO vs. WisdomTree Emerging Markets | SPDR EURO vs. WisdomTree Dynamic Currency |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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