Correlation Between IShares 1 and WisdomTree International

Can any of the company-specific risk be diversified away by investing in both IShares 1 and WisdomTree International 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 1 and WisdomTree International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 1 5 Year and WisdomTree International High, you can compare the effects of market volatilities on IShares 1 and WisdomTree International 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 1 with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and WisdomTree International.

Diversification Opportunities for IShares 1 and WisdomTree International

0.96

Correlation Coefficient

IShares 1  WisdomTree International

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 1 5 Year and WisdomTree International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and IShares 1 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 1 5 Year are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of IShares 1 i.e., IShares 1 and WisdomTree International go up and down completely randomly.

Pair Corralation between IShares 1 and WisdomTree International

Given the investment horizon of 90 days IShares 1 is expected to generate 5.13 times less return on investment than WisdomTree International. But when comparing it to its historical volatility, iShares 1 5 Year is 6.29 times less risky than WisdomTree International. It trades about 0.53 of its potential returns per unit of risk. WisdomTree International High is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  3,863  in WisdomTree International High on December 4, 2024 and sell it today you would earn a total of  230.00  from holding WisdomTree International High or generate 5.95% return on investment over 90 days.

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

iShares 1 5 Year  vs.  WisdomTree International High

iShares 1 5

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 5 Year are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International High are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, WisdomTree International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares 1 and WisdomTree International

The main advantage of trading using opposite IShares 1 and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, WisdomTree International 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 International will offset losses from the drop in WisdomTree International's long position.

The idea behind iShares 1 5 Year and WisdomTree International High 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.