Correlation Between WisdomTree High and WisdomTree International

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

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

Diversification Opportunities for WisdomTree High and WisdomTree International

0.78

Correlation Coefficient

WisdomTree High  WisdomTree International

Poor diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree High Dividend and WisdomTree International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and WisdomTree High 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 High Dividend are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of WisdomTree High i.e., WisdomTree High and WisdomTree International go up and down completely randomly.

Pair Corralation between WisdomTree High and WisdomTree International

Considering the 90-day investment horizon WisdomTree High Dividend is expected to generate 0.96 times more return on investment than WisdomTree International. However, WisdomTree High Dividend is 1.04 times less risky than WisdomTree International. It trades about 0.07 of its potential returns per unit of risk. WisdomTree International SmallCap is currently generating about 0.05 per unit of risk. If you would invest  7,422  in WisdomTree High Dividend on December 5, 2024 and sell it today you would earn a total of  2,343  from holding WisdomTree High Dividend or generate 31.57% return on investment over 90 days.

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

WisdomTree High Dividend  vs.  WisdomTree International Small

WisdomTree High Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree High Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, WisdomTree High is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International SmallCap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, WisdomTree International is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WisdomTree High and WisdomTree International

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

The idea behind WisdomTree High Dividend and WisdomTree International SmallCap 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.