Correlation Between WisdomTree International and WisdomTree High

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

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

Diversification Opportunities for WisdomTree International and WisdomTree High

-0.73

Correlation Coefficient

WisdomTree International  WisdomTree High

Pay attention - limited upside

The 3 months correlation between WisdomTree and WisdomTree is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Small and WisdomTree High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree High Dividend and WisdomTree International 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 International SmallCap are associated (or correlated) with WisdomTree High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree High Dividend has no effect on the direction of WisdomTree International i.e., WisdomTree International and WisdomTree High go up and down completely randomly.

Pair Corralation between WisdomTree International and WisdomTree High

Considering the 90-day investment horizon WisdomTree International SmallCap is expected to generate 0.9 times more return on investment than WisdomTree High. However, WisdomTree International SmallCap is 1.12 times less risky than WisdomTree High. It trades about 0.13 of its potential returns per unit of risk. WisdomTree High Dividend is currently generating about -0.11 per unit of risk. If you would invest  6,409  in WisdomTree International SmallCap on September 17, 2024 and sell it today you would earn a total of  80.00  from holding WisdomTree International SmallCap or generate 1.25% return on investment over 90 days.

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

WisdomTree International Small  vs.  WisdomTree High Dividend

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

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

WisdomTree High Dividend

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree High Dividend are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with WisdomTree International and WisdomTree High

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

The idea behind WisdomTree International SmallCap and WisdomTree High Dividend 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.