Correlation Between WisdomTree India and VanEck India

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

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

Diversification Opportunities for WisdomTree India and VanEck India

0.95

Correlation Coefficient

WisdomTree India  VanEck India

Almost no diversification

The 3 months correlation between WisdomTree and VanEck is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree India Earnings and VanEck India Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck India Growth and WisdomTree India 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 India Earnings are associated (or correlated) with VanEck India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck India Growth has no effect on the direction of WisdomTree India i.e., WisdomTree India and VanEck India go up and down completely randomly.

Pair Corralation between WisdomTree India and VanEck India

Considering the 90-day investment horizon WisdomTree India Earnings is expected to generate 0.81 times more return on investment than VanEck India. However, WisdomTree India Earnings is 1.24 times less risky than VanEck India. It trades about -0.05 of its potential returns per unit of risk. VanEck India Growth is currently generating about -0.17 per unit of risk. If you would invest  4,509  in WisdomTree India Earnings on December 30, 2024 and sell it today you would lose (161.00) from holding WisdomTree India Earnings or give up 3.57% of portfolio value over 90 days.

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

WisdomTree India Earnings  vs.  VanEck India Growth

WisdomTree India Earnings

Risk-Adjusted Performance

Very Weak

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

VanEck India Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck India Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with WisdomTree India and VanEck India

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

The idea behind WisdomTree India Earnings and VanEck India Growth 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.