Correlation Between IShares International and WisdomTree Emerging

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

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

Diversification Opportunities for IShares International and WisdomTree Emerging

0.96

Correlation Coefficient

IShares International  WisdomTree Emerging

Almost no diversification

The 3 months correlation between IShares and WisdomTree is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Select and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and IShares International 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 iShares International Select 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 IShares International i.e., IShares International and WisdomTree Emerging go up and down completely randomly.

Pair Corralation between IShares International and WisdomTree Emerging

Considering the 90-day investment horizon IShares International is expected to generate 1.42 times less return on investment than WisdomTree Emerging. In addition to that, IShares International is 1.05 times more volatile than WisdomTree Emerging Markets. It trades about 0.03 of its total potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about 0.04 per unit of volatility. If you would invest  4,228  in WisdomTree Emerging Markets on September 28, 2024 and sell it today you would earn a total of  682.50  from holding WisdomTree Emerging Markets or generate 16.14% return on investment over 90 days.

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

iShares International Select  vs.  WisdomTree Emerging Markets

iShares International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares International Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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 Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with IShares International and WisdomTree Emerging

The main advantage of trading using opposite IShares International and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares International 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 iShares International Select 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.