Correlation Between WisdomTree International and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and Vanguard FTSE 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 Vanguard FTSE 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 Vanguard FTSE Europe, you can compare the effects of market volatilities on WisdomTree International and Vanguard FTSE 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 Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and Vanguard FTSE.
Diversification Opportunities for WisdomTree International and Vanguard FTSE
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between WisdomTree and Vanguard is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and Vanguard FTSE Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Europe 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Europe has no effect on the direction of WisdomTree International i.e., WisdomTree International and Vanguard FTSE go up and down completely randomly.
Pair Corralation between WisdomTree International and Vanguard FTSE
Given the investment horizon of 90 days WisdomTree International Hedged is expected to under-perform the Vanguard FTSE. In addition to that, WisdomTree International is 1.04 times more volatile than Vanguard FTSE Europe. It trades about -0.17 of its total potential returns per unit of risk. Vanguard FTSE Europe is currently generating about -0.07 per unit of volatility. If you would invest 7,317 in Vanguard FTSE Europe on January 18, 2025 and sell it today you would lose (324.00) from holding Vanguard FTSE Europe or give up 4.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
WisdomTree International Hedge vs. Vanguard FTSE Europe
Performance |
| Timeline |
| WisdomTree International |
| Vanguard FTSE Europe |
WisdomTree International and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and Vanguard FTSE
The main advantage of trading using opposite WisdomTree International and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, Vanguard FTSE 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.The idea behind WisdomTree International Hedged and Vanguard FTSE Europe 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.
| Vanguard FTSE vs. Vanguard FTSE Pacific | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard FTSE All World | Vanguard FTSE vs. Vanguard FTSE Developed |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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