Correlation Between First Trust and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and WisdomTree Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Japan and WisdomTree Japan Hedged, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WisdomTree Japan.
Diversification Opportunities for First Trust and WisdomTree Japan
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and WisdomTree is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Japan 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 First Trust 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 First Trust 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 Hedged has no effect on the direction of First Trust i.e., First Trust and WisdomTree Japan go up and down completely randomly.
Pair Corralation between First Trust and WisdomTree Japan
Considering the 90-day investment horizon First Trust Japan is expected to generate 1.22 times more return on investment than WisdomTree Japan. However, First Trust is 1.22 times more volatile than WisdomTree Japan Hedged. It trades about 0.11 of its potential returns per unit of risk. WisdomTree Japan Hedged is currently generating about 0.07 per unit of risk. If you would invest 5,171 in First Trust Japan on September 1, 2024 and sell it today you would earn a total of 146.00 from holding First Trust Japan or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Japan vs. WisdomTree Japan Hedged
Performance |
| Timeline |
| First Trust Japan |
| WisdomTree Japan Hedged |
First Trust and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and WisdomTree Japan
The main advantage of trading using opposite First Trust and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. iShares MSCI South | First Trust vs. iShares MSCI Hong | First Trust vs. iShares MSCI Taiwan | First Trust vs. iShares MSCI Germany |
| WisdomTree Japan vs. WisdomTree Emerging Markets | WisdomTree Japan vs. WisdomTree SmallCap Quality | WisdomTree Japan vs. First Trust Emerging | WisdomTree Japan vs. First Trust Japan |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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