Correlation Between WisdomTree Europe and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and IShares MSCI 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 IShares MSCI 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 iShares MSCI Europe, you can compare the effects of market volatilities on WisdomTree Europe and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and IShares MSCI.
Diversification Opportunities for WisdomTree Europe and IShares MSCI
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and IShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Hedged and iShares MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Europe 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Europe has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and IShares MSCI go up and down completely randomly.
Pair Corralation between WisdomTree Europe and IShares MSCI
Given the investment horizon of 90 days WisdomTree Europe Hedged is expected to generate 0.67 times more return on investment than IShares MSCI. However, WisdomTree Europe Hedged is 1.49 times less risky than IShares MSCI. It trades about -0.01 of its potential returns per unit of risk. iShares MSCI Europe is currently generating about -0.06 per unit of risk. If you would invest 4,349 in WisdomTree Europe Hedged on September 2, 2024 and sell it today you would lose (9.00) from holding WisdomTree Europe Hedged or give up 0.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe Hedged vs. iShares MSCI Europe
Performance |
| Timeline |
| WisdomTree Europe Hedged |
| iShares MSCI Europe |
WisdomTree Europe and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and IShares MSCI
The main advantage of trading using opposite WisdomTree Europe and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.| WisdomTree Europe vs. Pacer Trendpilot Mid | WisdomTree Europe vs. Pacer Trendpilot Large | WisdomTree Europe vs. Pacer Trendpilot 100 | WisdomTree Europe vs. Pacer Trendpilot International |
| IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. Invesco International BuyBack | IShares MSCI vs. First Trust Eurozone | IShares MSCI vs. iShares MSCI Qatar |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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