Correlation Between ProShares MSCI and WisdomTree Dynamic

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

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

Diversification Opportunities for ProShares MSCI and WisdomTree Dynamic

0.52

Correlation Coefficient

ProShares MSCI  WisdomTree Dynamic

Very weak diversification

The 3 months correlation between ProShares and WisdomTree is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding ProShares MSCI Europe and WisdomTree Dynamic Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Dynamic and ProShares 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 ProShares MSCI Europe are associated (or correlated) with WisdomTree Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Dynamic has no effect on the direction of ProShares MSCI i.e., ProShares MSCI and WisdomTree Dynamic go up and down completely randomly.

Pair Corralation between ProShares MSCI and WisdomTree Dynamic

Given the investment horizon of 90 days ProShares MSCI Europe is expected to under-perform the WisdomTree Dynamic. In addition to that, ProShares MSCI is 1.09 times more volatile than WisdomTree Dynamic Currency. It trades about -0.17 of its total potential returns per unit of risk. WisdomTree Dynamic Currency is currently generating about 0.05 per unit of volatility. If you would invest  3,450  in WisdomTree Dynamic Currency on October 7, 2024 and sell it today you would earn a total of  42.00  from holding WisdomTree Dynamic Currency or generate 1.22% return on investment over 90 days.

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

ProShares MSCI Europe  vs.  WisdomTree Dynamic Currency

ProShares MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

WisdomTree Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Dynamic Currency has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, WisdomTree Dynamic is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ProShares MSCI and WisdomTree Dynamic

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

The idea behind ProShares MSCI Europe and WisdomTree Dynamic Currency 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.