Correlation Between WisdomTree Emerging and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and Vanguard Total 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 Vanguard Total 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 Vanguard Total World, you can compare the effects of market volatilities on WisdomTree Emerging and Vanguard Total 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 Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and Vanguard Total.
Diversification Opportunities for WisdomTree Emerging and Vanguard Total
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between WisdomTree and Vanguard is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and Vanguard Total World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total World 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total World has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and Vanguard Total go up and down completely randomly.
Pair Corralation between WisdomTree Emerging and Vanguard Total
Allowing for the 90-day total investment horizon WisdomTree Emerging is expected to generate 1.36 times less return on investment than Vanguard Total. In addition to that, WisdomTree Emerging is 1.16 times more volatile than Vanguard Total World. It trades about 0.06 of its total potential returns per unit of risk. Vanguard Total World is currently generating about 0.1 per unit of volatility. 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 |
WisdomTree Emerging Markets vs. Vanguard Total World
Performance |
| Timeline |
| WisdomTree Emerging |
| Vanguard Total World |
WisdomTree Emerging and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Emerging and Vanguard Total
The main advantage of trading using opposite WisdomTree Emerging and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, Vanguard Total 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 Vanguard Total will offset losses from the drop in Vanguard Total's long position.The idea behind WisdomTree Emerging Markets and Vanguard Total World pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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