Correlation Between IShares Currency and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both IShares Currency and WisdomTree International 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 International 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 International Hedged, you can compare the effects of market volatilities on IShares Currency and WisdomTree International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Currency and WisdomTree International.
Diversification Opportunities for IShares Currency and WisdomTree International
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and WisdomTree is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding iShares Currency Hedged and WisdomTree International Hedge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of IShares Currency i.e., IShares Currency and WisdomTree International go up and down completely randomly.
Pair Corralation between IShares Currency and WisdomTree International
Given the investment horizon of 90 days iShares Currency Hedged is expected to generate 0.99 times more return on investment than WisdomTree International. However, iShares Currency Hedged is 1.01 times less risky than WisdomTree International. It trades about 0.02 of its potential returns per unit of risk. WisdomTree International Hedged is currently generating about -0.02 per unit of risk. If you would invest 3,196 in iShares Currency Hedged on September 1, 2024 and sell it today you would earn a total of 48.00 from holding iShares Currency Hedged or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
iShares Currency Hedged vs. WisdomTree International Hedge
Performance |
| Timeline |
| iShares Currency Hedged |
| WisdomTree International |
IShares Currency and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Currency and WisdomTree International
The main advantage of trading using opposite IShares Currency and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Currency position performs unexpectedly, WisdomTree International 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 International will offset losses from the drop in WisdomTree International's long position.| IShares Currency vs. Vanguard Global ex US | IShares Currency vs. Vanguard FTSE All World | IShares Currency vs. Vanguard Small Cap Value | IShares Currency vs. Vanguard FTSE Pacific |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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