Correlation Between WisdomTree International and Franklin International

Can any of the company-specific risk be diversified away by investing in both WisdomTree International and Franklin 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 WisdomTree International and Franklin International 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 Franklin International Core, you can compare the effects of market volatilities on WisdomTree International and Franklin 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 WisdomTree International with a short position of Franklin International. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and Franklin International.

Diversification Opportunities for WisdomTree International and Franklin International

0.86

Correlation Coefficient

WisdomTree International  Franklin International

Very poor diversification

The 3 months correlation between WisdomTree and Franklin is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and Franklin International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin International 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 Franklin International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin International has no effect on the direction of WisdomTree International i.e., WisdomTree International and Franklin International go up and down completely randomly.

Pair Corralation between WisdomTree International and Franklin International

Given the investment horizon of 90 days WisdomTree International Hedged is expected to generate 0.83 times more return on investment than Franklin International. However, WisdomTree International Hedged is 1.2 times less risky than Franklin International. It trades about 0.0 of its potential returns per unit of risk. Franklin International Core is currently generating about -0.09 per unit of risk. If you would invest  4,377  in WisdomTree International Hedged on October 1, 2024 and sell it today you would lose (4.00) from holding WisdomTree International Hedged or give up 0.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.62%
Values	Daily Returns

WisdomTree International Hedge  vs.  Franklin International Core

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, WisdomTree International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Franklin International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin International Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with WisdomTree International and Franklin International

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

The idea behind WisdomTree International Hedged and Franklin International Core 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.