Correlation Between WisdomTree Europe and ProShares MSCI

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

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

Diversification Opportunities for WisdomTree Europe and ProShares MSCI

0.49

Correlation Coefficient

WisdomTree Europe  ProShares MSCI

Very weak diversification

The 3 months correlation between WisdomTree and ProShares is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Hedged and ProShares MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares MSCI Europe 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 Hedged are associated (or correlated) with ProShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares MSCI Europe has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and ProShares MSCI go up and down completely randomly.

Pair Corralation between WisdomTree Europe and ProShares MSCI

Given the investment horizon of 90 days WisdomTree Europe Hedged is expected to generate 0.93 times more return on investment than ProShares MSCI. However, WisdomTree Europe Hedged is 1.08 times less risky than ProShares MSCI. It trades about 0.08 of its potential returns per unit of risk. ProShares MSCI Europe is currently generating about -0.17 per unit of risk. If you would invest  3,745  in WisdomTree Europe Hedged on October 7, 2024 and sell it today you would earn a total of  76.00  from holding WisdomTree Europe Hedged or generate 2.03% return on investment over 90 days.

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

WisdomTree Europe Hedged  vs.  ProShares MSCI Europe

WisdomTree Europe Hedged

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with WisdomTree Europe and ProShares MSCI

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

The idea behind WisdomTree Europe Hedged and ProShares MSCI Europe 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.