Correlation Between WisdomTree Europe and Xtrackers MSCI

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

By analyzing existing cross correlation between WisdomTree Europe Quality and Xtrackers MSCI All, you can compare the effects of market volatilities on WisdomTree Europe and Xtrackers MSCI 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 Europe with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and Xtrackers MSCI.

Diversification Opportunities for WisdomTree Europe and Xtrackers MSCI

0.8

Correlation Coefficient

WisdomTree Europe  Xtrackers MSCI

Very poor diversification

The 3 months correlation between WisdomTree and Xtrackers is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Quality and Xtrackers MSCI All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI All and WisdomTree Europe 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 Europe Quality are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI All has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between WisdomTree Europe and Xtrackers MSCI

Given the investment horizon of 90 days WisdomTree Europe is expected to generate 2.88 times less return on investment than Xtrackers MSCI. In addition to that, WisdomTree Europe is 1.2 times more volatile than Xtrackers MSCI All. It trades about 0.03 of its total potential returns per unit of risk. Xtrackers MSCI All is currently generating about 0.1 per unit of volatility. If you would invest  2,819  in Xtrackers MSCI All on October 6, 2024 and sell it today you would earn a total of  605.00  from holding Xtrackers MSCI All or generate 21.46% return on investment over 90 days.

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

WisdomTree Europe Quality  vs.  Xtrackers MSCI All

WisdomTree Europe Quality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Europe Quality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Xtrackers MSCI All

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers MSCI All has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with WisdomTree Europe and Xtrackers MSCI

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

The idea behind WisdomTree Europe Quality and Xtrackers MSCI All 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.