Correlation Between WisdomTree International and WisdomTree Global
Can any of the company-specific risk be diversified away by investing in both WisdomTree International and WisdomTree Global 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 WisdomTree Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree International Quality and WisdomTree Global ex US, you can compare the effects of market volatilities on WisdomTree International and WisdomTree Global 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 WisdomTree Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and WisdomTree Global.
Diversification Opportunities for WisdomTree International and WisdomTree Global
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Quali and WisdomTree Global ex US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Global 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 Quality are associated (or correlated) with WisdomTree Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Global has no effect on the direction of WisdomTree International i.e., WisdomTree International and WisdomTree Global go up and down completely randomly.
Pair Corralation between WisdomTree International and WisdomTree Global
Given the investment horizon of 90 days WisdomTree International Quality is expected to generate 0.89 times more return on investment than WisdomTree Global. However, WisdomTree International Quality is 1.13 times less risky than WisdomTree Global. It trades about 0.44 of its potential returns per unit of risk. WisdomTree Global ex US is currently generating about 0.23 per unit of risk. If you would invest 3,419 in WisdomTree International Quality on November 2, 2024 and sell it today you would earn a total of 238.00 from holding WisdomTree International Quality or generate 6.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Quali vs. WisdomTree Global ex US
Performance |
| Timeline |
| WisdomTree International |
| WisdomTree Global |
WisdomTree International and WisdomTree Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and WisdomTree Global
The main advantage of trading using opposite WisdomTree International and WisdomTree Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, WisdomTree Global 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 WisdomTree Global will offset losses from the drop in WisdomTree Global's long position.The idea behind WisdomTree International Quality and WisdomTree Global ex US 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.
| WisdomTree Global vs. WisdomTree Global High | WisdomTree Global vs. WisdomTree International MidCap | WisdomTree Global vs. WisdomTree Japan SmallCap | WisdomTree Global vs. WisdomTree International High |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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