Correlation Between WisdomTree International and WisdomTree Trust

Can any of the company-specific risk be diversified away by investing in both WisdomTree International and WisdomTree Trust 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 International and WisdomTree Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WisdomTree International Al and WisdomTree Trust , you can compare the effects of market volatilities on WisdomTree International and WisdomTree Trust 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 International with a short position of WisdomTree Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and WisdomTree Trust.

Diversification Opportunities for WisdomTree International and WisdomTree Trust

0.39

Correlation Coefficient

WisdomTree International  WisdomTree Trust

Weak diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Al and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust and WisdomTree International 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 International Al are associated (or correlated) with WisdomTree Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Trust has no effect on the direction of WisdomTree International i.e., WisdomTree International and WisdomTree Trust go up and down completely randomly.

Pair Corralation between WisdomTree International and WisdomTree Trust

Given the investment horizon of 90 days WisdomTree International Al is expected to under-perform the WisdomTree Trust. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree International Al is 1.06 times less risky than WisdomTree Trust. The etf trades about -0.27 of its potential returns per unit of risk. The WisdomTree Trust is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  11,011  in WisdomTree Trust on October 12, 2024 and sell it today you would lose (366.00) from holding WisdomTree Trust or give up 3.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

WisdomTree International Al  vs.  WisdomTree Trust

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International Al has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

WisdomTree Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, WisdomTree Trust is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with WisdomTree International and WisdomTree Trust

The main advantage of trading using opposite WisdomTree International and WisdomTree Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, WisdomTree Trust 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 Trust will offset losses from the drop in WisdomTree Trust's long position.

The idea behind WisdomTree International Al and WisdomTree Trust 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.