Correlation Between WisdomTree Emerging and SPDR Bloomberg

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

By analyzing existing cross correlation between WisdomTree Emerging Markets and SPDR Bloomberg Emerging, you can compare the effects of market volatilities on WisdomTree Emerging and SPDR Bloomberg 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 Emerging with a short position of SPDR Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and SPDR Bloomberg.

Diversification Opportunities for WisdomTree Emerging and SPDR Bloomberg

0.67

Correlation Coefficient

WisdomTree Emerging  SPDR Bloomberg

Poor diversification

The 3 months correlation between WisdomTree and SPDR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and SPDR Bloomberg Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Emerging and WisdomTree Emerging 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 Emerging Markets are associated (or correlated) with SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Emerging has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and SPDR Bloomberg

Given the investment horizon of 90 days WisdomTree Emerging is expected to generate 1.73 times less return on investment than SPDR Bloomberg. In addition to that, WisdomTree Emerging is 1.34 times more volatile than SPDR Bloomberg Emerging. It trades about 0.04 of its total potential returns per unit of risk. SPDR Bloomberg Emerging is currently generating about 0.09 per unit of volatility. If you would invest  1,989  in SPDR Bloomberg Emerging on September 18, 2024 and sell it today you would earn a total of  11.00  from holding SPDR Bloomberg Emerging or generate 0.55% return on investment over 90 days.

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

WisdomTree Emerging Markets  vs.  SPDR Bloomberg Emerging

WisdomTree Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, WisdomTree Emerging is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SPDR Bloomberg Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree Emerging and SPDR Bloomberg

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

The idea behind WisdomTree Emerging Markets and SPDR Bloomberg Emerging 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 Global Correlations module to find global opportunities by holding instruments from different markets.