Correlation Between WisdomTree Emerging and IShares Currency

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

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

Diversification Opportunities for WisdomTree Emerging and IShares Currency

-0.31

Correlation Coefficient

WisdomTree Emerging  IShares Currency

Very good diversification

The 3 months correlation between WisdomTree and IShares is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged 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 Markets are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and IShares Currency go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and IShares Currency

Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to under-perform the IShares Currency. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Emerging Markets is 1.3 times less risky than IShares Currency. The etf trades about -0.14 of its potential returns per unit of risk. The iShares Currency Hedged is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,242  in iShares Currency Hedged on October 7, 2024 and sell it today you would earn a total of  37.00  from holding iShares Currency Hedged or generate 0.87% return on investment over 90 days.

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

WisdomTree Emerging Markets  vs.  iShares Currency Hedged

WisdomTree Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, WisdomTree Emerging is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Currency Hedged

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Currency Hedged are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, IShares Currency is not utilizing all of its potentials. The newest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with WisdomTree Emerging and IShares Currency

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

The idea behind WisdomTree Emerging Markets and iShares Currency 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.