Correlation Between WisdomTree International and IShares Currency
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and IShares Currency 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 IShares Currency 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 iShares Currency Hedged, you can compare the effects of market volatilities on WisdomTree International and IShares Currency 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 IShares Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and IShares Currency.
Diversification Opportunities for WisdomTree International and IShares Currency
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and IShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency 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 IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of WisdomTree International i.e., WisdomTree International and IShares Currency go up and down completely randomly.
Pair Corralation between WisdomTree International and IShares Currency
Given the investment horizon of 90 days WisdomTree International is expected to generate 1.06 times less return on investment than IShares Currency. But when comparing it to its historical volatility, WisdomTree International Hedged is 1.03 times less risky than IShares Currency. It trades about 0.06 of its potential returns per unit of risk. iShares Currency Hedged is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,624 in iShares Currency Hedged on October 24, 2024 and sell it today you would earn a total of 612.00 from holding iShares Currency Hedged or generate 23.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Hedge vs. iShares Currency Hedged
Performance |
| Timeline |
| WisdomTree International |
| iShares Currency Hedged |
WisdomTree International and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and IShares Currency
The main advantage of trading using opposite WisdomTree International and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, IShares Currency 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 IShares Currency will offset losses from the drop in IShares Currency's long position.The idea behind WisdomTree International Hedged and iShares Currency Hedged pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares MSCI Intl | IShares Currency vs. iShares Currency Hedged |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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