Correlation Between WisdomTree Trust and WisdomTree International

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

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

Diversification Opportunities for WisdomTree Trust and WisdomTree International

0.81

Correlation Coefficient

WisdomTree Trust  WisdomTree International

Very poor diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Trust and WisdomTree International Al in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and WisdomTree Trust 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 Trust are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of WisdomTree Trust i.e., WisdomTree Trust and WisdomTree International go up and down completely randomly.

Pair Corralation between WisdomTree Trust and WisdomTree International

Given the investment horizon of 90 days WisdomTree Trust is expected to under-perform the WisdomTree International. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Trust is 1.11 times less risky than WisdomTree International. The etf trades about -0.05 of its potential returns per unit of risk. The WisdomTree International Al is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,070  in WisdomTree International Al on November 28, 2024 and sell it today you would earn a total of  144.00  from holding WisdomTree International Al or generate 3.54% return on investment over 90 days.

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

WisdomTree Trust   vs.  WisdomTree International Al

WisdomTree Trust

Risk-Adjusted Performance

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.

WisdomTree International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Al are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with WisdomTree Trust and WisdomTree International

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

The idea behind WisdomTree Trust and WisdomTree International Al 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.