Correlation Between WisdomTree International and IShares Technology

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Can any of the company-specific risk be diversified away by investing in both WisdomTree International and IShares Technology 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 IShares Technology 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 iShares Technology ETF, you can compare the effects of market volatilities on WisdomTree International and IShares Technology 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 IShares Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and IShares Technology.

Diversification Opportunities for WisdomTree International and IShares Technology

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between WisdomTree and IShares is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Al and iShares Technology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Technology ETF 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 IShares Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Technology ETF has no effect on the direction of WisdomTree International i.e., WisdomTree International and IShares Technology go up and down completely randomly.

Pair Corralation between WisdomTree International and IShares Technology

Given the investment horizon of 90 days WisdomTree International Al is expected to under-perform the IShares Technology. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree International Al is 1.52 times less risky than IShares Technology. The etf trades about -0.07 of its potential returns per unit of risk. The iShares Technology ETF is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  14,148  in iShares Technology ETF on September 1, 2024 and sell it today you would earn a total of  1,785  from holding iShares Technology ETF or generate 12.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

WisdomTree International Al  vs.  iShares Technology ETF

 Performance 
       Timeline  
WisdomTree International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 fairly strong basic indicators, WisdomTree International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
iShares Technology ETF 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Technology ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

WisdomTree International and IShares Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WisdomTree International and IShares Technology

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