Correlation Between IShares Edge and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both IShares Edge and WisdomTree 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 IShares Edge and WisdomTree International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Edge MSCI and WisdomTree International Equity, you can compare the effects of market volatilities on IShares Edge and WisdomTree 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 IShares Edge with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Edge and WisdomTree International.
Diversification Opportunities for IShares Edge and WisdomTree International
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and WisdomTree is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI and WisdomTree International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and IShares Edge 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 iShares Edge MSCI are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of IShares Edge i.e., IShares Edge and WisdomTree International go up and down completely randomly.
Pair Corralation between IShares Edge and WisdomTree International
Given the investment horizon of 90 days iShares Edge MSCI is expected to generate 0.95 times more return on investment than WisdomTree International. However, iShares Edge MSCI is 1.05 times less risky than WisdomTree International. It trades about -0.2 of its potential returns per unit of risk. WisdomTree International Equity is currently generating about -0.21 per unit of risk. If you would invest 2,862 in iShares Edge MSCI on August 27, 2024 and sell it today you would lose (93.00) from holding iShares Edge MSCI or give up 3.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Edge MSCI vs. WisdomTree International Equit
Performance |
| Timeline |
| iShares Edge MSCI |
| WisdomTree International |
IShares Edge and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Edge and WisdomTree International
The main advantage of trading using opposite IShares Edge and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Edge position performs unexpectedly, WisdomTree 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 WisdomTree International will offset losses from the drop in WisdomTree International's long position.| IShares Edge vs. Dimensional Targeted Value | IShares Edge vs. Dimensional Small Cap | IShares Edge vs. Dimensional Marketwide Value | IShares Edge vs. Dimensional Core Equity |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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