Correlation Between WisdomTree International and PGIM ETF

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

Diversification Opportunities for WisdomTree International and PGIM ETF

0.94

Correlation Coefficient

WisdomTree International  PGIM ETF

Almost no diversification

The 3 months correlation between WisdomTree and PGIM is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and PGIM ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM ETF Trust 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 PGIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM ETF Trust has no effect on the direction of WisdomTree International i.e., WisdomTree International and PGIM ETF go up and down completely randomly.

Pair Corralation between WisdomTree International and PGIM ETF

Given the investment horizon of 90 days WisdomTree International is expected to generate 2.96 times less return on investment than PGIM ETF. But when comparing it to its historical volatility, WisdomTree International Hedged is 1.66 times less risky than PGIM ETF. It trades about 0.02 of its potential returns per unit of risk. PGIM ETF Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,247  in PGIM ETF Trust on December 29, 2024 and sell it today you would earn a total of  160.00  from holding PGIM ETF Trust or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

WisdomTree International Hedge  vs.  PGIM ETF Trust

WisdomTree International

Risk-Adjusted Performance

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.

PGIM ETF Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM ETF Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, PGIM ETF is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree International and PGIM ETF

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

The idea behind WisdomTree International Hedged and PGIM ETF Trust 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 Global Correlations module to find global opportunities by holding instruments from different markets.