Correlation Between Vanguard Total and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total World and WisdomTree Emerging Markets, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and WisdomTree Emerging.
Diversification Opportunities for Vanguard Total and WisdomTree Emerging
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vanguard and WisdomTree is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total World and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and Vanguard Total 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 Total World 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 Total i.e., Vanguard Total and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between Vanguard Total and WisdomTree Emerging
Allowing for the 90-day total investment horizon Vanguard Total World is expected to generate 0.86 times more return on investment than WisdomTree Emerging. However, Vanguard Total World is 1.16 times less risky than WisdomTree Emerging. It trades about 0.1 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about 0.06 per unit of risk. If you would invest 8,471 in Vanguard Total World on August 28, 2024 and sell it today you would earn a total of 3,639 from holding Vanguard Total World or generate 42.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total World vs. WisdomTree Emerging Markets
Performance |
| Timeline |
| Vanguard Total World |
| WisdomTree Emerging |
Vanguard Total and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and WisdomTree Emerging
The main advantage of trading using opposite Vanguard Total and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard FTSE Emerging |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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