Correlation Between NYSE Composite and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and WisdomTree Japan 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 NYSE Composite and WisdomTree Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and WisdomTree Japan Hedged, you can compare the effects of market volatilities on NYSE Composite and WisdomTree Japan 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 NYSE Composite with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and WisdomTree Japan.
Diversification Opportunities for NYSE Composite and WisdomTree Japan
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and WisdomTree is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged and NYSE Composite 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 NYSE Composite are associated (or correlated) with WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan Hedged has no effect on the direction of NYSE Composite i.e., NYSE Composite and WisdomTree Japan go up and down completely randomly.
Pair Corralation between NYSE Composite and WisdomTree Japan
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.77 times less return on investment than WisdomTree Japan. But when comparing it to its historical volatility, NYSE Composite is 1.49 times less risky than WisdomTree Japan. It trades about 0.08 of its potential returns per unit of risk. WisdomTree Japan Hedged is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,165 in WisdomTree Japan Hedged on September 3, 2024 and sell it today you would earn a total of 1,272 from holding WisdomTree Japan Hedged or generate 58.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. WisdomTree Japan Hedged
Performance |
| Timeline |
NYSE Composite and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
WisdomTree Japan Hedged
Pair trading matchups for WisdomTree Japan
Pair Trading with NYSE Composite and WisdomTree Japan
The main advantage of trading using opposite NYSE Composite and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, WisdomTree Japan 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 Japan will offset losses from the drop in WisdomTree Japan's long position.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. LB Foster | NYSE Composite vs. HUTCHMED DRC | NYSE Composite vs. Bridgford Foods |
| WisdomTree Japan vs. iShares MSCI Qatar | WisdomTree Japan vs. iShares MSCI UAE | WisdomTree Japan vs. iShares MSCI Europe | WisdomTree Japan vs. iShares MSCI Japan |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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