Correlation Between IShares Core and WisdomTree International

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

Diversification Opportunities for IShares Core and WisdomTree International

-0.55

Correlation Coefficient

IShares Core  WisdomTree International

Excellent diversification

The 3 months correlation between IShares and WisdomTree is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and WisdomTree International MidCa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and IShares Core 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 Core SP 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 Core i.e., IShares Core and WisdomTree International go up and down completely randomly.

Pair Corralation between IShares Core and WisdomTree International

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the WisdomTree International. In addition to that, IShares Core is 1.24 times more volatile than WisdomTree International MidCap. It trades about -0.08 of its total potential returns per unit of risk. WisdomTree International MidCap is currently generating about 0.2 per unit of volatility. If you would invest  6,057  in WisdomTree International MidCap on December 30, 2024 and sell it today you would earn a total of  618.00  from holding WisdomTree International MidCap or generate 10.2% return on investment over 90 days.

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

iShares Core SP  vs.  WisdomTree International MidCa

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WisdomTree International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International MidCap are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward indicators, WisdomTree International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Core and WisdomTree International

The main advantage of trading using opposite IShares Core and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SP and WisdomTree International MidCap 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.