Correlation Between WisdomTree International and IQ Global

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

By analyzing existing cross correlation between WisdomTree International High and IQ Global Equity, you can compare the effects of market volatilities on WisdomTree International and IQ Global 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 IQ Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and IQ Global.

Diversification Opportunities for WisdomTree International and IQ Global

0.62

Correlation Coefficient

WisdomTree International  IQ Global

Poor diversification

The 3 months correlation between WisdomTree and WRND is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International High and IQ Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Global Equity 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 High are associated (or correlated) with IQ Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Global Equity has no effect on the direction of WisdomTree International i.e., WisdomTree International and IQ Global go up and down completely randomly.

Pair Corralation between WisdomTree International and IQ Global

Considering the 90-day investment horizon WisdomTree International High is expected to generate 0.8 times more return on investment than IQ Global. However, WisdomTree International High is 1.25 times less risky than IQ Global. It trades about 0.28 of its potential returns per unit of risk. IQ Global Equity is currently generating about 0.02 per unit of risk. If you would invest  3,756  in WisdomTree International High on December 29, 2024 and sell it today you would earn a total of  510.00  from holding WisdomTree International High or generate 13.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

WisdomTree International High  vs.  IQ Global Equity

WisdomTree International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International High are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, WisdomTree International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

IQ Global Equity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IQ Global Equity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IQ Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree International and IQ Global

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

The idea behind WisdomTree International High and IQ Global Equity 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.