Correlation Between WisdomTree International and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both WisdomTree International 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 WisdomTree International and WisdomTree Europe 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 Europe Hedged, you can compare the effects of market volatilities on WisdomTree International 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 WisdomTree International with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and WisdomTree Europe.
Diversification Opportunities for WisdomTree International and WisdomTree Europe
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge 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 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 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 WisdomTree International i.e., WisdomTree International and WisdomTree Europe go up and down completely randomly.
Pair Corralation between WisdomTree International and WisdomTree Europe
Given the investment horizon of 90 days WisdomTree International Hedged is expected to generate 0.82 times more return on investment than WisdomTree Europe. However, WisdomTree International Hedged is 1.22 times less risky than WisdomTree Europe. It trades about -0.19 of its potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about -0.18 per unit of risk. If you would invest 4,523 in WisdomTree International Hedged on August 29, 2024 and sell it today you would lose (131.00) from holding WisdomTree International Hedged or give up 2.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Hedge vs. WisdomTree Europe Hedged
Performance |
| Timeline |
| WisdomTree International |
| WisdomTree Europe Hedged |
WisdomTree International and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and WisdomTree Europe
The main advantage of trading using opposite WisdomTree International and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International 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.| 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 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |