Correlation Between Deka EURO and WisdomTree Issuer

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

By analyzing existing cross correlation between Deka EURO STOXX and WisdomTree Issuer ICAV, you can compare the effects of market volatilities on Deka EURO and WisdomTree Issuer 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 Deka EURO with a short position of WisdomTree Issuer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deka EURO and WisdomTree Issuer.

Diversification Opportunities for Deka EURO and WisdomTree Issuer

-0.55

Correlation Coefficient

Deka EURO  WisdomTree Issuer

Excellent diversification

The 3 months correlation between Deka and WisdomTree is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Deka EURO STOXX and WisdomTree Issuer ICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Issuer ICAV and Deka EURO 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 Deka EURO STOXX are associated (or correlated) with WisdomTree Issuer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Issuer ICAV has no effect on the direction of Deka EURO i.e., Deka EURO and WisdomTree Issuer go up and down completely randomly.

Pair Corralation between Deka EURO and WisdomTree Issuer

Assuming the 90 days trading horizon Deka EURO is expected to generate 27.07 times less return on investment than WisdomTree Issuer. But when comparing it to its historical volatility, Deka EURO STOXX is 1.57 times less risky than WisdomTree Issuer. It trades about 0.01 of its potential returns per unit of risk. WisdomTree Issuer ICAV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,953  in WisdomTree Issuer ICAV on September 19, 2024 and sell it today you would earn a total of  1,420  from holding WisdomTree Issuer ICAV or generate 72.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Deka EURO STOXX  vs.  WisdomTree Issuer ICAV

Deka EURO STOXX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deka EURO STOXX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Deka EURO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

WisdomTree Issuer ICAV

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Issuer ICAV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, WisdomTree Issuer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Deka EURO and WisdomTree Issuer

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

The idea behind Deka EURO STOXX and WisdomTree Issuer ICAV 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.