Correlation Between WisdomTree Global and IShares MSCI

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

By analyzing existing cross correlation between WisdomTree Global ex US and iShares MSCI Intl, you can compare the effects of market volatilities on WisdomTree Global and IShares MSCI 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 Global with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Global and IShares MSCI.

Diversification Opportunities for WisdomTree Global and IShares MSCI

0.75

Correlation Coefficient

WisdomTree Global  IShares MSCI

Poor diversification

The 3 months correlation between WisdomTree and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Global ex US and iShares MSCI Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Intl and WisdomTree Global 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 Global ex US are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Intl has no effect on the direction of WisdomTree Global i.e., WisdomTree Global and IShares MSCI go up and down completely randomly.

Pair Corralation between WisdomTree Global and IShares MSCI

Considering the 90-day investment horizon WisdomTree Global is expected to generate 21.55 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, WisdomTree Global ex US is 1.04 times less risky than IShares MSCI. It trades about 0.01 of its potential returns per unit of risk. iShares MSCI Intl is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,747  in iShares MSCI Intl on December 30, 2024 and sell it today you would earn a total of  263.00  from holding iShares MSCI Intl or generate 7.02% return on investment over 90 days.

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

WisdomTree Global ex US  vs.  iShares MSCI Intl

WisdomTree Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Global ex US has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, WisdomTree Global is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

iShares MSCI Intl

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Intl are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with WisdomTree Global and IShares MSCI

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

The idea behind WisdomTree Global ex US and iShares MSCI Intl 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.