Correlation Between WisdomTree India and Invesco India

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

Diversification Opportunities for WisdomTree India and Invesco India

1.0

Correlation Coefficient

WisdomTree India  Invesco India

No risk reduction

The 3 months correlation between WisdomTree and Invesco is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree India Earnings and Invesco India ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco India ETF 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 Invesco India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco India ETF has no effect on the direction of WisdomTree India i.e., WisdomTree India and Invesco India go up and down completely randomly.

Pair Corralation between WisdomTree India and Invesco India

Considering the 90-day investment horizon WisdomTree India Earnings is expected to under-perform the Invesco India. In addition to that, WisdomTree India is 1.05 times more volatile than Invesco India ETF. It trades about -0.08 of its total potential returns per unit of risk. Invesco India ETF is currently generating about -0.06 per unit of volatility. If you would invest  2,607  in Invesco India ETF on December 24, 2024 and sell it today you would lose (99.00) from holding Invesco India ETF or give up 3.8% 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.  Invesco India ETF

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.

Invesco India ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco India ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Invesco India is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree India and Invesco India

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

The idea behind WisdomTree India Earnings and Invesco India ETF 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.