Correlation Between Vanguard FTSE and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and WisdomTree Emerging 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 Vanguard FTSE and WisdomTree Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and WisdomTree Emerging Currency, you can compare the effects of market volatilities on Vanguard FTSE and WisdomTree Emerging 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 Vanguard FTSE with a short position of WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and WisdomTree Emerging.
Diversification Opportunities for Vanguard FTSE and WisdomTree Emerging
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and WisdomTree is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and WisdomTree Emerging Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and Vanguard FTSE 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 Vanguard FTSE Developed are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between Vanguard FTSE and WisdomTree Emerging
Considering the 90-day investment horizon Vanguard FTSE Developed is expected to generate 2.14 times more return on investment than WisdomTree Emerging. However, Vanguard FTSE is 2.14 times more volatile than WisdomTree Emerging Currency. It trades about 0.05 of its potential returns per unit of risk. WisdomTree Emerging Currency is currently generating about 0.05 per unit of risk. If you would invest 4,047 in Vanguard FTSE Developed on August 24, 2024 and sell it today you would earn a total of 881.00 from holding Vanguard FTSE Developed or generate 21.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. WisdomTree Emerging Currency
Performance |
| Timeline |
| Vanguard FTSE Developed |
| WisdomTree Emerging |
Vanguard FTSE and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and WisdomTree Emerging
The main advantage of trading using opposite Vanguard FTSE and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, WisdomTree Emerging 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 Emerging will offset losses from the drop in WisdomTree Emerging's long position.| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Value Index | Vanguard FTSE vs. Vanguard Small Cap Value |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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