Correlation Between WisdomTree Interest and WisdomTree Emerging

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

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

Diversification Opportunities for WisdomTree Interest and WisdomTree Emerging

0.14

Correlation Coefficient

WisdomTree Interest  WisdomTree Emerging

Average diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Interest Rate and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and WisdomTree Interest 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 Interest Rate are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of WisdomTree Interest i.e., WisdomTree Interest and WisdomTree Emerging go up and down completely randomly.

Pair Corralation between WisdomTree Interest and WisdomTree Emerging

Given the investment horizon of 90 days WisdomTree Interest Rate is expected to under-perform the WisdomTree Emerging. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Interest Rate is 2.04 times less risky than WisdomTree Emerging. The etf trades about -0.02 of its potential returns per unit of risk. The WisdomTree Emerging Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,393  in WisdomTree Emerging Markets on December 30, 2024 and sell it today you would earn a total of  83.00  from holding WisdomTree Emerging Markets or generate 1.3% return on investment over 90 days.

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

WisdomTree Interest Rate  vs.  WisdomTree Emerging Markets

WisdomTree Interest Rate

Risk-Adjusted Performance

Very Weak

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

WisdomTree Emerging

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Markets are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, WisdomTree Emerging is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree Interest and WisdomTree Emerging

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

The idea behind WisdomTree Interest Rate and WisdomTree Emerging Markets 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.