Correlation Between WisdomTree Emerging and WisdomTree High

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

Diversification Opportunities for WisdomTree Emerging and WisdomTree High

0.46

Correlation Coefficient

WisdomTree Emerging  WisdomTree High

Very weak diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Currency and WisdomTree High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree High Yield 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 WisdomTree High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree High Yield has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and WisdomTree High go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and WisdomTree High

Considering the 90-day investment horizon WisdomTree Emerging Currency is expected to generate 1.42 times more return on investment than WisdomTree High. However, WisdomTree Emerging is 1.42 times more volatile than WisdomTree High Yield. It trades about 0.16 of its potential returns per unit of risk. WisdomTree High Yield is currently generating about 0.08 per unit of risk. If you would invest  1,702  in WisdomTree Emerging Currency on December 22, 2024 and sell it today you would earn a total of  65.00  from holding WisdomTree Emerging Currency or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

WisdomTree Emerging Currency  vs.  WisdomTree High Yield

WisdomTree Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Currency are ranked lower than 12 (%) 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.

WisdomTree High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree High Yield are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, WisdomTree High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree Emerging and WisdomTree High

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

The idea behind WisdomTree Emerging Currency and WisdomTree High Yield 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 Global Correlations module to find global opportunities by holding instruments from different markets.