Correlation Between IShares MSCI and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 IShares MSCI and WisdomTree Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Europe and WisdomTree Japan Hedged, you can compare the effects of market volatilities on IShares MSCI 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 IShares MSCI with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and WisdomTree Japan.
Diversification Opportunities for IShares MSCI and WisdomTree Japan
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and WisdomTree is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Europe and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged and IShares MSCI 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 MSCI Europe 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 Hedged has no effect on the direction of IShares MSCI i.e., IShares MSCI and WisdomTree Japan go up and down completely randomly.
Pair Corralation between IShares MSCI and WisdomTree Japan
Given the investment horizon of 90 days iShares MSCI Europe is expected to generate 1.49 times more return on investment than WisdomTree Japan. However, IShares MSCI is 1.49 times more volatile than WisdomTree Japan Hedged. It trades about -0.05 of its potential returns per unit of risk. WisdomTree Japan Hedged is currently generating about -0.12 per unit of risk. If you would invest 5,977 in iShares MSCI Europe on January 14, 2025 and sell it today you would lose (284.00) from holding iShares MSCI Europe or give up 4.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Europe vs. WisdomTree Japan Hedged
Performance |
| Timeline |
| iShares MSCI Europe |
| WisdomTree Japan Hedged |
IShares MSCI and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and WisdomTree Japan
The main advantage of trading using opposite IShares MSCI and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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.| IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. Invesco International BuyBack | IShares MSCI vs. First Trust Eurozone | IShares MSCI vs. iShares MSCI Qatar |
| WisdomTree Japan vs. WisdomTree Emerging Markets | WisdomTree Japan vs. WisdomTree SmallCap Quality | WisdomTree Japan vs. First Trust Emerging | WisdomTree Japan vs. First Trust Japan |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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