Correlation Between IShares International and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both IShares International 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 International 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 International Select and WisdomTree International SmallCap, you can compare the effects of market volatilities on IShares International 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 International with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares International and WisdomTree International.
Diversification Opportunities for IShares International and WisdomTree International
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and WisdomTree is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Select and WisdomTree International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and IShares International 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 International Select 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 International i.e., IShares International and WisdomTree International go up and down completely randomly.
Pair Corralation between IShares International and WisdomTree International
Considering the 90-day investment horizon iShares International Select is expected to under-perform the WisdomTree International. In addition to that, IShares International is 1.19 times more volatile than WisdomTree International SmallCap. It trades about -0.02 of its total potential returns per unit of risk. WisdomTree International SmallCap is currently generating about 0.05 per unit of volatility. If you would invest 6,452 in WisdomTree International SmallCap on September 2, 2024 and sell it today you would earn a total of 56.00 from holding WisdomTree International SmallCap or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares International Select vs. WisdomTree International Small
Performance |
| Timeline |
| iShares International |
| WisdomTree International |
IShares International and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares International and WisdomTree International
The main advantage of trading using opposite IShares International and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares International 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 International vs. iShares Core High | IShares International vs. SPDR SP International | IShares International vs. iShares Select Dividend | IShares International vs. iShares Emerging Markets |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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