Correlation Between WisdomTree Europe and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe 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 WisdomTree Europe and WisdomTree Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Europe Hedged and WisdomTree Japan SmallCap, you can compare the effects of market volatilities on WisdomTree Europe 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 WisdomTree Europe with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and WisdomTree Japan.
Diversification Opportunities for WisdomTree Europe and WisdomTree Japan
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Hedged 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 WisdomTree Europe 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 WisdomTree Europe Hedged 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 WisdomTree Europe i.e., WisdomTree Europe and WisdomTree Japan go up and down completely randomly.
Pair Corralation between WisdomTree Europe and WisdomTree Japan
Given the investment horizon of 90 days WisdomTree Europe is expected to generate 1.95 times less return on investment than WisdomTree Japan. But when comparing it to its historical volatility, WisdomTree Europe Hedged is 1.16 times less risky than WisdomTree Japan. It trades about 0.22 of its potential returns per unit of risk. WisdomTree Japan SmallCap is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 9,154 in WisdomTree Japan SmallCap on November 24, 2025 and sell it today you would earn a total of 1,926 from holding WisdomTree Japan SmallCap or generate 21.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe Hedged vs. WisdomTree Japan SmallCap
Performance |
| Timeline |
| WisdomTree Europe Hedged |
| WisdomTree Japan SmallCap |
WisdomTree Europe and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and WisdomTree Japan
The main advantage of trading using opposite WisdomTree Europe and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe 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.| WisdomTree Europe vs. ProShares MSCI Emerging | WisdomTree Europe vs. Litman Gregory Funds | WisdomTree Europe vs. Starboard Investment Trust | WisdomTree Europe vs. iShares ESG Aware |
| WisdomTree Japan vs. WisdomTree SmallCap Quality | WisdomTree Japan vs. iShares MSCI Indonesia | WisdomTree Japan vs. WisdomTree Cloud Computing | WisdomTree Japan vs. Davis Select Financial |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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