Correlation Between WisdomTree Emerging and VanEck JP

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

By analyzing existing cross correlation between WisdomTree Emerging Currency and VanEck JP Morgan, you can compare the effects of market volatilities on WisdomTree Emerging and VanEck JP 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 VanEck JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and VanEck JP.

Diversification Opportunities for WisdomTree Emerging and VanEck JP

0.99

Correlation Coefficient

WisdomTree Emerging  VanEck JP

No risk reduction

The 3 months correlation between WisdomTree and VanEck is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Currency and VanEck JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck JP Morgan 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 Currency are associated (or correlated) with VanEck JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck JP Morgan has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and VanEck JP go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and VanEck JP

Considering the 90-day investment horizon WisdomTree Emerging is expected to generate 1.3 times less return on investment than VanEck JP. But when comparing it to its historical volatility, WisdomTree Emerging Currency is 1.1 times less risky than VanEck JP. It trades about 0.12 of its potential returns per unit of risk. VanEck JP Morgan is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,295  in VanEck JP Morgan on December 29, 2024 and sell it today you would earn a total of  86.00  from holding VanEck JP Morgan or generate 3.75% return on investment over 90 days.

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

WisdomTree Emerging Currency  vs.  VanEck JP Morgan

WisdomTree Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Currency are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, WisdomTree Emerging is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

VanEck JP Morgan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck JP Morgan are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, VanEck JP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree Emerging and VanEck JP

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

The idea behind WisdomTree Emerging Currency and VanEck JP Morgan 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.