Correlation Between WisdomTree International and Invesco SP

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

Diversification Opportunities for WisdomTree International and Invesco SP

-0.67

Correlation Coefficient

WisdomTree International  Invesco SP

Excellent diversification

The 3 months correlation between WisdomTree and Invesco is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Al and Invesco SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP MidCap 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP MidCap has no effect on the direction of WisdomTree International i.e., WisdomTree International and Invesco SP go up and down completely randomly.

Pair Corralation between WisdomTree International and Invesco SP

Given the investment horizon of 90 days WisdomTree International Al is expected to under-perform the Invesco SP. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree International Al is 1.34 times less risky than Invesco SP. The etf trades about -0.07 of its potential returns per unit of risk. The Invesco SP MidCap is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  10,979  in Invesco SP MidCap on September 12, 2024 and sell it today you would earn a total of  1,352  from holding Invesco SP MidCap or generate 12.31% return on investment over 90 days.

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

WisdomTree International Al  vs.  Invesco SP MidCap

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 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.

Invesco SP MidCap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP MidCap are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WisdomTree International and Invesco SP

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

The idea behind WisdomTree International Al and Invesco SP MidCap 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.