Correlation Between WisdomTree International and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and WisdomTree Emerging 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 WisdomTree International and WisdomTree Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree International Hedged and WisdomTree Emerging Markets, you can compare the effects of market volatilities on WisdomTree International and WisdomTree Emerging 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 WisdomTree International with a short position of WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and WisdomTree Emerging.
Diversification Opportunities for WisdomTree International and WisdomTree Emerging
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and WisdomTree 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 WisdomTree International Hedged are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of WisdomTree International i.e., WisdomTree International and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between WisdomTree International and WisdomTree Emerging
Given the investment horizon of 90 days WisdomTree International Hedged is expected to generate 0.84 times more return on investment than WisdomTree Emerging. However, WisdomTree International Hedged is 1.19 times less risky than WisdomTree Emerging. It trades about -0.16 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about -0.14 per unit of risk. If you would invest 4,523 in WisdomTree International Hedged on August 28, 2024 and sell it today you would lose (103.00) from holding WisdomTree International Hedged or give up 2.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Hedge vs. WisdomTree Emerging Markets
Performance |
| Timeline |
| WisdomTree International |
| WisdomTree Emerging |
WisdomTree International and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and WisdomTree Emerging
The main advantage of trading using opposite WisdomTree International and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, WisdomTree Emerging 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 Emerging will offset losses from the drop in WisdomTree Emerging's long position.| WisdomTree International vs. iShares MSCI Intl | WisdomTree International vs. iShares Edge MSCI | WisdomTree International vs. iShares MSCI Emerging | WisdomTree International vs. iShares MSCI Intl |
| WisdomTree Emerging vs. WisdomTree SmallCap Quality | WisdomTree Emerging vs. WisdomTree Japan Hedged | WisdomTree Emerging vs. WisdomTree Interest Rate | WisdomTree Emerging vs. WisdomTree 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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