Correlation Between IShares Currency and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both IShares Currency 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 IShares Currency and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Currency Hedged and WisdomTree Europe Hedged, you can compare the effects of market volatilities on IShares Currency 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 IShares Currency with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Currency and WisdomTree Europe.
Diversification Opportunities for IShares Currency and WisdomTree Europe
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and WisdomTree is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares Currency Hedged and WisdomTree Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Hedged and IShares Currency 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 iShares Currency Hedged 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 Hedged has no effect on the direction of IShares Currency i.e., IShares Currency and WisdomTree Europe go up and down completely randomly.
Pair Corralation between IShares Currency and WisdomTree Europe
Given the investment horizon of 90 days iShares Currency Hedged is expected to generate 0.8 times more return on investment than WisdomTree Europe. However, iShares Currency Hedged is 1.24 times less risky than WisdomTree Europe. It trades about 0.0 of its potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about -0.08 per unit of risk. If you would invest 3,517 in iShares Currency Hedged on August 25, 2024 and sell it today you would lose (2.00) from holding iShares Currency Hedged or give up 0.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Currency Hedged vs. WisdomTree Europe Hedged
Performance |
| Timeline |
| iShares Currency Hedged |
| WisdomTree Europe Hedged |
IShares Currency and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Currency and WisdomTree Europe
The main advantage of trading using opposite IShares Currency and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Currency 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.| IShares Currency vs. Dimensional Core Equity | IShares Currency vs. Dimensional Emerging Core | IShares Currency vs. Dimensional Targeted Value | IShares Currency vs. Dimensional Small Cap |
| WisdomTree Europe vs. WisdomTree Europe Quality | WisdomTree Europe vs. iShares Currency Hedged | WisdomTree Europe vs. Xtrackers MSCI Europe | WisdomTree Europe vs. WisdomTree Europe Hedged |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |