Correlation Between WisdomTree Emerging and American Century
Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and American Century 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 WisdomTree Emerging and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Emerging Markets and American Century ETF, you can compare the effects of market volatilities on WisdomTree Emerging and American Century 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 WisdomTree Emerging with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and American Century.
Diversification Opportunities for WisdomTree Emerging and American Century
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and American Century ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century ETF and WisdomTree Emerging 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 WisdomTree Emerging Markets are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century ETF has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and American Century go up and down completely randomly.
Pair Corralation between WisdomTree Emerging and American Century
Allowing for the 90-day total investment horizon WisdomTree Emerging Markets is expected to generate 1.2 times more return on investment than American Century. However, WisdomTree Emerging is 1.2 times more volatile than American Century ETF. It trades about 0.02 of its potential returns per unit of risk. American Century ETF is currently generating about 0.01 per unit of risk. If you would invest 3,069 in WisdomTree Emerging Markets on September 1, 2024 and sell it today you would earn a total of 79.00 from holding WisdomTree Emerging Markets or generate 2.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Emerging Markets vs. American Century ETF
Performance |
| Timeline |
| WisdomTree Emerging |
| American Century ETF |
WisdomTree Emerging and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Emerging and American Century
The main advantage of trading using opposite WisdomTree Emerging and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.| WisdomTree Emerging vs. Columbia EM Core | WisdomTree Emerging vs. WisdomTree BioRevolution | WisdomTree Emerging vs. iShares MSCI Emerging | WisdomTree Emerging vs. WisdomTree Emerging Markets |
| American Century vs. EA Series Trust | American Century vs. Northern Lights | American Century vs. Northern Lights | American Century vs. Northern Lights |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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