Correlation Between IShares Select and WisdomTree International

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

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

Diversification Opportunities for IShares Select and WisdomTree International

0.47

Correlation Coefficient

IShares Select  WisdomTree International

Very weak diversification

The 3 months correlation between IShares and WisdomTree is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding iShares Select Dividend and WisdomTree International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and IShares Select 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 iShares Select 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 IShares Select i.e., IShares Select and WisdomTree International go up and down completely randomly.

Pair Corralation between IShares Select and WisdomTree International

Considering the 90-day investment horizon IShares Select is expected to generate 4.52 times less return on investment than WisdomTree International. In addition to that, IShares Select is 1.02 times more volatile than WisdomTree International Equity. It trades about 0.05 of its total potential returns per unit of risk. WisdomTree International Equity is currently generating about 0.22 per unit of volatility. If you would invest  5,258  in WisdomTree International Equity on December 30, 2024 and sell it today you would earn a total of  581.00  from holding WisdomTree International Equity or generate 11.05% return on investment over 90 days.

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

iShares Select Dividend  vs.  WisdomTree International Equit

iShares Select Dividend

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Select Dividend are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Equity are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, WisdomTree International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Select and WisdomTree International

The main advantage of trading using opposite IShares Select and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Select 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 iShares Select Dividend and WisdomTree International 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.