Correlation Between IShares MSCI and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI Europe and WisdomTree Europe Hedged, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and WisdomTree Europe.
Diversification Opportunities for IShares MSCI and WisdomTree Europe
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and WisdomTree is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Europe 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 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 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 MSCI i.e., IShares MSCI and WisdomTree Europe go up and down completely randomly.
Pair Corralation between IShares MSCI and WisdomTree Europe
Given the investment horizon of 90 days IShares MSCI is expected to generate 1.56 times less return on investment than WisdomTree Europe. In addition to that, IShares MSCI is 1.37 times more volatile than WisdomTree Europe Hedged. It trades about 0.03 of its total potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about 0.07 per unit of volatility. If you would invest 2,947 in WisdomTree Europe Hedged on August 27, 2024 and sell it today you would earn a total of 847.00 from holding WisdomTree Europe Hedged or generate 28.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Europe vs. WisdomTree Europe Hedged
Performance |
| Timeline |
| iShares MSCI Europe |
| WisdomTree Europe Hedged |
IShares MSCI and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and WisdomTree Europe
The main advantage of trading using opposite IShares MSCI and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI vs. WisdomTree Europe Hedged | IShares MSCI vs. WisdomTree International Hedged | IShares MSCI vs. WisdomTree Emerging Markets | IShares MSCI vs. WisdomTree Dynamic Currency |
| WisdomTree Europe vs. WisdomTree International Hedged | WisdomTree Europe vs. WisdomTree Emerging Markets | WisdomTree Europe vs. WisdomTree Dynamic Currency |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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