Correlation Between WisdomTree International and ETF Series

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

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

Diversification Opportunities for WisdomTree International and ETF Series

0.97

Correlation Coefficient

WisdomTree International  ETF Series

Almost no diversification

The 3 months correlation between WisdomTree and ETF is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Multi and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 Multifactor are associated (or correlated) with ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of WisdomTree International i.e., WisdomTree International and ETF Series go up and down completely randomly.

Pair Corralation between WisdomTree International and ETF Series

Given the investment horizon of 90 days WisdomTree International is expected to generate 1.49 times less return on investment than ETF Series. But when comparing it to its historical volatility, WisdomTree International Multifactor is 1.57 times less risky than ETF Series. It trades about 0.17 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,367  in ETF Series Solutions on November 28, 2024 and sell it today you would earn a total of  160.00  from holding ETF Series Solutions or generate 6.76% return on investment over 90 days.

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

WisdomTree International Multi  vs.  ETF Series Solutions

WisdomTree International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Multifactor are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, WisdomTree International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ETF Series Solutions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, ETF Series may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with WisdomTree International and ETF Series

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

The idea behind WisdomTree International Multifactor and ETF Series Solutions 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.