Correlation Between WisdomTree Japan and WisdomTree Japan

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

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

Diversification Opportunities for WisdomTree Japan and WisdomTree Japan

0.16

Correlation Coefficient

WisdomTree Japan  WisdomTree Japan

Average diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan SmallCap and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged and WisdomTree Japan 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 Japan SmallCap are associated (or correlated) with WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan Hedged has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and WisdomTree Japan go up and down completely randomly.

Pair Corralation between WisdomTree Japan and WisdomTree Japan

Considering the 90-day investment horizon WisdomTree Japan SmallCap is expected to under-perform the WisdomTree Japan. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Japan SmallCap is 1.19 times less risky than WisdomTree Japan. The etf trades about -0.03 of its potential returns per unit of risk. The WisdomTree Japan Hedged is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10,860  in WisdomTree Japan Hedged on December 3, 2024 and sell it today you would lose (2.00) from holding WisdomTree Japan Hedged or give up 0.02% of portfolio value over 90 days.

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

WisdomTree Japan SmallCap  vs.  WisdomTree Japan Hedged

WisdomTree Japan SmallCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Japan SmallCap has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady technical and fundamental indicators, WisdomTree Japan is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

WisdomTree Japan Hedged

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Japan Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, WisdomTree Japan is not utilizing all of its potentials. The new stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with WisdomTree Japan and WisdomTree Japan

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

The idea behind WisdomTree Japan SmallCap and WisdomTree Japan Hedged 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.