Correlation Between WisdomTree International and Vanguard International
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and Vanguard International 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 International 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 International Dividend, you can compare the effects of market volatilities on WisdomTree International and Vanguard International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and Vanguard International.
Diversification Opportunities for WisdomTree International and Vanguard International
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and Vanguard is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and Vanguard International Dividen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of WisdomTree International i.e., WisdomTree International and Vanguard International go up and down completely randomly.
Pair Corralation between WisdomTree International and Vanguard International
Given the investment horizon of 90 days WisdomTree International Hedged is expected to under-perform the Vanguard International. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree International Hedged is 1.04 times less risky than Vanguard International. The etf trades about -0.17 of its potential returns per unit of risk. The Vanguard International Dividend is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 8,491 in Vanguard International Dividend on August 30, 2024 and sell it today you would lose (180.00) from holding Vanguard International Dividend or give up 2.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Hedge vs. Vanguard International Dividen
Performance |
| Timeline |
| WisdomTree International |
| Vanguard International |
WisdomTree International and Vanguard International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and Vanguard International
The main advantage of trading using opposite WisdomTree International and Vanguard International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, Vanguard International 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 International will offset losses from the drop in Vanguard International's long position.The idea behind WisdomTree International Hedged and Vanguard International Dividend 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.
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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