Correlation Between IShares MSCI and WisdomTree International

Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI Emerging and WisdomTree International High, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and WisdomTree International.

Diversification Opportunities for IShares MSCI and WisdomTree International

0.93

Correlation Coefficient

IShares MSCI  WisdomTree International

Almost no diversification

The 3 months correlation between IShares and WisdomTree is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging and WisdomTree International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and IShares MSCI 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 MSCI Emerging 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 MSCI i.e., IShares MSCI and WisdomTree International go up and down completely randomly.

Pair Corralation between IShares MSCI and WisdomTree International

Given the investment horizon of 90 days IShares MSCI is expected to generate 2.5 times less return on investment than WisdomTree International. In addition to that, IShares MSCI is 1.13 times more volatile than WisdomTree International High. It trades about 0.01 of its total potential returns per unit of risk. WisdomTree International High is currently generating about 0.03 per unit of volatility. If you would invest  3,787  in WisdomTree International High on September 15, 2024 and sell it today you would earn a total of  90.00  from holding WisdomTree International High or generate 2.38% return on investment over 90 days.

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

iShares MSCI Emerging  vs.  WisdomTree International High

iShares MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

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

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, WisdomTree International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares MSCI and WisdomTree International

The main advantage of trading using opposite IShares MSCI and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI Emerging and WisdomTree International High 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.