Correlation Between SPDR EURO and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both SPDR EURO 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 SPDR EURO and WisdomTree Japan 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 Japan Hedged, you can compare the effects of market volatilities on SPDR EURO 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 SPDR EURO with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR EURO and WisdomTree Japan.
Diversification Opportunities for SPDR EURO and WisdomTree Japan
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPDR and WisdomTree is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding SPDR EURO STOXX and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged 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 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 Hedged has no effect on the direction of SPDR EURO i.e., SPDR EURO and WisdomTree Japan go up and down completely randomly.
Pair Corralation between SPDR EURO and WisdomTree Japan
Considering the 90-day investment horizon SPDR EURO STOXX is expected to under-perform the WisdomTree Japan. In addition to that, SPDR EURO is 1.02 times more volatile than WisdomTree Japan Hedged. It trades about -0.28 of its total potential returns per unit of risk. WisdomTree Japan Hedged is currently generating about 0.18 per unit of volatility. If you would invest 10,600 in WisdomTree Japan Hedged on August 25, 2024 and sell it today you would earn a total of 445.00 from holding WisdomTree Japan Hedged or generate 4.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR EURO STOXX vs. WisdomTree Japan Hedged
Performance |
| Timeline |
| SPDR EURO STOXX |
| WisdomTree Japan Hedged |
SPDR EURO and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR EURO and WisdomTree Japan
The main advantage of trading using opposite SPDR EURO and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR EURO 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.| 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 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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