Correlation Between IShares MSCI and WisdomTree Natural

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

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

Diversification Opportunities for IShares MSCI and WisdomTree Natural

0.39

Correlation Coefficient

IShares MSCI  WisdomTree Natural

Weak diversification

The 3 months correlation between IShares and WisdomTree is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Japan and WisdomTree Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Natural Gas and IShares MSCI 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 MSCI Japan are associated (or correlated) with WisdomTree Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Natural Gas has no effect on the direction of IShares MSCI i.e., IShares MSCI and WisdomTree Natural go up and down completely randomly.

Pair Corralation between IShares MSCI and WisdomTree Natural

Assuming the 90 days trading horizon iShares MSCI Japan is expected to generate 0.27 times more return on investment than WisdomTree Natural. However, iShares MSCI Japan is 3.69 times less risky than WisdomTree Natural. It trades about 0.03 of its potential returns per unit of risk. WisdomTree Natural Gas is currently generating about -0.07 per unit of risk. If you would invest  294,037  in iShares MSCI Japan on September 22, 2024 and sell it today you would earn a total of  32,913  from holding iShares MSCI Japan or generate 11.19% return on investment over 90 days.

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

iShares MSCI Japan  vs.  WisdomTree Natural Gas

iShares MSCI Japan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Japan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Natural Gas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Natural Gas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WisdomTree Natural is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares MSCI and WisdomTree Natural

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

The idea behind iShares MSCI Japan and WisdomTree Natural Gas 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.