Correlation Between WisdomTree Japan and Amg Gwk

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

Diversification Opportunities for WisdomTree Japan and Amg Gwk

0.87

Correlation Coefficient

WisdomTree Japan  Amg Gwk

Very poor diversification

The 3 months correlation between WisdomTree and Amg is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan SmallCap and Amg Gwk E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Gwk E 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 Amg Gwk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Gwk E has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and Amg Gwk go up and down completely randomly.

Pair Corralation between WisdomTree Japan and Amg Gwk

Considering the 90-day investment horizon WisdomTree Japan SmallCap is expected to generate 2.52 times more return on investment than Amg Gwk. However, WisdomTree Japan is 2.52 times more volatile than Amg Gwk E. It trades about 0.14 of its potential returns per unit of risk. Amg Gwk E is currently generating about 0.07 per unit of risk. If you would invest  7,518  in WisdomTree Japan SmallCap on December 28, 2024 and sell it today you would earn a total of  509.00  from holding WisdomTree Japan SmallCap or generate 6.77% return on investment over 90 days.

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

WisdomTree Japan SmallCap  vs.  Amg Gwk E

WisdomTree Japan SmallCap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan SmallCap are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, WisdomTree Japan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Amg Gwk E

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amg Gwk E are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Amg Gwk 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 Japan and Amg Gwk

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

The idea behind WisdomTree Japan SmallCap and Amg Gwk E 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.