Correlation Between WisdomTree International and Xtrackers MSCI

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

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

Diversification Opportunities for WisdomTree International and Xtrackers MSCI

0.64

Correlation Coefficient

WisdomTree International  Xtrackers MSCI

Poor diversification

The 3 months correlation between WisdomTree and Xtrackers is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and Xtrackers MSCI All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI All and WisdomTree 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 WisdomTree International Hedged are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI All has no effect on the direction of WisdomTree International i.e., WisdomTree International and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between WisdomTree International and Xtrackers MSCI

Given the investment horizon of 90 days WisdomTree International is expected to generate 3.95 times less return on investment than Xtrackers MSCI. In addition to that, WisdomTree International is 1.07 times more volatile than Xtrackers MSCI All. It trades about 0.03 of its total potential returns per unit of risk. Xtrackers MSCI All is currently generating about 0.11 per unit of volatility. If you would invest  3,337  in Xtrackers MSCI All on September 12, 2024 and sell it today you would earn a total of  148.00  from holding Xtrackers MSCI All or generate 4.44% return on investment over 90 days.

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

WisdomTree International Hedge  vs.  Xtrackers MSCI All

WisdomTree International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Hedged are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, WisdomTree International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xtrackers MSCI All

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI All are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with WisdomTree International and Xtrackers MSCI

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

The idea behind WisdomTree International Hedged and Xtrackers MSCI All 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.