Correlation Between WisdomTree International and SPDR Barclays
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and SPDR Barclays 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 SPDR Barclays 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 SPDR Barclays Intermediate, you can compare the effects of market volatilities on WisdomTree International and SPDR Barclays 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 SPDR Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and SPDR Barclays.
Diversification Opportunities for WisdomTree International and SPDR Barclays
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WisdomTree and SPDR is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and SPDR Barclays Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Interm 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 SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Interm has no effect on the direction of WisdomTree International i.e., WisdomTree International and SPDR Barclays go up and down completely randomly.
Pair Corralation between WisdomTree International and SPDR Barclays
Given the investment horizon of 90 days WisdomTree International is expected to generate 1.56 times less return on investment than SPDR Barclays. In addition to that, WisdomTree International is 2.63 times more volatile than SPDR Barclays Intermediate. It trades about 0.04 of its total potential returns per unit of risk. SPDR Barclays Intermediate is currently generating about 0.18 per unit of volatility. If you would invest 3,296 in SPDR Barclays Intermediate on September 3, 2024 and sell it today you would earn a total of 30.00 from holding SPDR Barclays Intermediate or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Hedge vs. SPDR Barclays Intermediate
Performance |
| Timeline |
| WisdomTree International |
| SPDR Barclays Interm |
WisdomTree International and SPDR Barclays Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and SPDR Barclays
The main advantage of trading using opposite WisdomTree International and SPDR Barclays positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, SPDR Barclays 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 SPDR Barclays will offset losses from the drop in SPDR Barclays' long position.The idea behind WisdomTree International Hedged and SPDR Barclays Intermediate 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.
| SPDR Barclays vs. SPDR Barclays Short | SPDR Barclays vs. SPDR Bloomberg Emerging | SPDR Barclays vs. SPDR Barclays Long | SPDR Barclays vs. SPDR Barclays Short |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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