Correlation Between NYSE Composite and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and WisdomTree Europe 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 Europe 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 Europe Hedged, you can compare the effects of market volatilities on NYSE Composite and WisdomTree Europe 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 Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and WisdomTree Europe.
Diversification Opportunities for NYSE Composite and WisdomTree Europe
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NYSE and WisdomTree is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and WisdomTree Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe 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 Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Hedged has no effect on the direction of NYSE Composite i.e., NYSE Composite and WisdomTree Europe go up and down completely randomly.
Pair Corralation between NYSE Composite and WisdomTree Europe
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.81 times more return on investment than WisdomTree Europe. However, NYSE Composite is 1.23 times less risky than WisdomTree Europe. It trades about 0.17 of its potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about 0.08 per unit of risk. If you would invest 1,482,589 in NYSE Composite on August 25, 2024 and sell it today you would earn a total of 529,756 from holding NYSE Composite or generate 35.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. WisdomTree Europe Hedged
Performance |
| Timeline |
NYSE Composite and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
WisdomTree Europe Hedged
Pair trading matchups for WisdomTree Europe
Pair Trading with NYSE Composite and WisdomTree Europe
The main advantage of trading using opposite NYSE Composite and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, WisdomTree Europe 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 Europe will offset losses from the drop in WisdomTree Europe's long position.| NYSE Composite vs. Glacier Bancorp | NYSE Composite vs. LithiumBank Resources Corp | NYSE Composite vs. Stepstone Group | NYSE Composite vs. Pintec Technology Holdings |
| WisdomTree Europe vs. WisdomTree Japan Hedged | WisdomTree Europe vs. WisdomTree Europe SmallCap | WisdomTree Europe vs. Xtrackers MSCI EAFE | WisdomTree Europe vs. SPDR EURO STOXX |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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