Correlation Between WisdomTree Emerging and Columbia Short

Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and Columbia Short 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 Columbia Short 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 Columbia Short Duration, you can compare the effects of market volatilities on WisdomTree Emerging and Columbia Short 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 Columbia Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and Columbia Short.

Diversification Opportunities for WisdomTree Emerging and Columbia Short

0.64

Correlation Coefficient

WisdomTree Emerging  Columbia Short

Poor diversification

The 3 months correlation between WisdomTree and Columbia is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and Columbia Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Short Duration 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 Columbia Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Short Duration has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and Columbia Short go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and Columbia Short

Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to generate 2.18 times more return on investment than Columbia Short. However, WisdomTree Emerging is 2.18 times more volatile than Columbia Short Duration. It trades about 0.04 of its potential returns per unit of risk. Columbia Short Duration is currently generating about 0.01 per unit of risk. If you would invest  6,543  in WisdomTree Emerging Markets on September 3, 2024 and sell it today you would earn a total of  58.00  from holding WisdomTree Emerging Markets or generate 0.89% 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.  Columbia Short Duration

WisdomTree Emerging

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Markets are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Columbia Short Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with WisdomTree Emerging and Columbia Short

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

The idea behind WisdomTree Emerging Markets and Columbia Short Duration 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.