Correlation Between WisdomTree Emerging and Invesco International

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

Diversification Opportunities for WisdomTree Emerging and Invesco International

0.86

Correlation Coefficient

WisdomTree Emerging  Invesco International

Very poor diversification

The 3 months correlation between WisdomTree and Invesco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and Invesco International BuyBack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco International 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 Invesco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco International has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and Invesco International go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and Invesco International

Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to under-perform the Invesco International. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Emerging Markets is 1.06 times less risky than Invesco International. The etf trades about -0.14 of its potential returns per unit of risk. The Invesco International BuyBack is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,153  in Invesco International BuyBack on October 22, 2024 and sell it today you would lose (96.00) from holding Invesco International BuyBack or give up 2.31% of portfolio value over 90 days.

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

WisdomTree Emerging Markets  vs.  Invesco International BuyBack

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 latest uncertain performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Invesco International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco International BuyBack has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward-looking signals, Invesco International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with WisdomTree Emerging and Invesco International

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

The idea behind WisdomTree Emerging Markets and Invesco International BuyBack 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.