Correlation Between IShares Europe and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both IShares Europe 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 Europe 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 Europe ETF and WisdomTree International Hedged, you can compare the effects of market volatilities on IShares Europe 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 Europe with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Europe and WisdomTree International.
Diversification Opportunities for IShares Europe and WisdomTree International
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and WisdomTree is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares Europe ETF 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 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 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 Europe i.e., IShares Europe and WisdomTree International go up and down completely randomly.
Pair Corralation between IShares Europe and WisdomTree International
Considering the 90-day investment horizon iShares Europe ETF is expected to under-perform the WisdomTree International. In addition to that, IShares Europe is 1.48 times more volatile than WisdomTree International Hedged. It trades about -0.13 of its total potential returns per unit of risk. WisdomTree International Hedged is currently generating about -0.09 per unit of volatility. If you would invest 4,442 in WisdomTree International Hedged on August 31, 2024 and sell it today you would lose (59.00) from holding WisdomTree International Hedged or give up 1.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Europe ETF vs. WisdomTree International Hedge
Performance |
| Timeline |
| iShares Europe ETF |
| WisdomTree International |
IShares Europe and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Europe and WisdomTree International
The main advantage of trading using opposite IShares Europe and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Europe 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 Europe vs. iShares MSCI Eurozone | IShares Europe vs. iShares MSCI Pacific | IShares Europe vs. iShares Latin America | IShares Europe vs. iShares MSCI France |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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