Correlation Between WisdomTree International and OShares Europe
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and OShares 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 OShares 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 OShares Europe Quality, you can compare the effects of market volatilities on WisdomTree International and OShares 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 OShares Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and OShares Europe.
Diversification Opportunities for WisdomTree International and OShares Europe
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and OShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and OShares Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OShares Europe Quality 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 OShares Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OShares Europe Quality has no effect on the direction of WisdomTree International i.e., WisdomTree International and OShares Europe go up and down completely randomly.
Pair Corralation between WisdomTree International and OShares Europe
Given the investment horizon of 90 days WisdomTree International Hedged is expected to generate 0.75 times more return on investment than OShares Europe. However, WisdomTree International Hedged is 1.33 times less risky than OShares Europe. It trades about -0.19 of its potential returns per unit of risk. OShares Europe Quality is currently generating about -0.33 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Hedge vs. OShares Europe Quality
Performance |
| Timeline |
| WisdomTree International |
| OShares Europe Quality |
WisdomTree International and OShares Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and OShares Europe
The main advantage of trading using opposite WisdomTree International and OShares Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, OShares 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 OShares Europe will offset losses from the drop in OShares 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 |
| OShares Europe vs. WisdomTree International Hedged | OShares Europe vs. WisdomTree Emerging Markets | OShares 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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