Correlation Between IShares Europe and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both IShares Europe 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 Europe 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 Europe ETF and WisdomTree Europe SmallCap, you can compare the effects of market volatilities on IShares Europe 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 Europe with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Europe and WisdomTree Europe.
Diversification Opportunities for IShares Europe and WisdomTree Europe
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and WisdomTree is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Europe ETF and WisdomTree Europe SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe and IShares Europe 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 Europe ETF 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 has no effect on the direction of IShares Europe i.e., IShares Europe and WisdomTree Europe go up and down completely randomly.
Pair Corralation between IShares Europe and WisdomTree Europe
Considering the 90-day investment horizon IShares Europe is expected to generate 1.05 times less return on investment than WisdomTree Europe. But when comparing it to its historical volatility, iShares Europe ETF is 1.26 times less risky than WisdomTree Europe. It trades about 0.07 of its potential returns per unit of risk. WisdomTree Europe SmallCap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,997 in WisdomTree Europe SmallCap on September 1, 2024 and sell it today you would earn a total of 767.00 from holding WisdomTree Europe SmallCap or generate 15.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Europe ETF vs. WisdomTree Europe SmallCap
Performance |
| Timeline |
| iShares Europe ETF |
| WisdomTree Europe |
IShares Europe and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Europe and WisdomTree Europe
The main advantage of trading using opposite IShares Europe and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Europe 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 Europe vs. iShares MSCI Eurozone | IShares Europe vs. iShares MSCI Pacific | IShares Europe vs. iShares Latin America | IShares Europe vs. iShares MSCI France |
| WisdomTree Europe vs. WisdomTree International MidCap | WisdomTree Europe vs. WisdomTree Global High | WisdomTree Europe vs. WisdomTree International SmallCap | WisdomTree Europe vs. WisdomTree Japan SmallCap |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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