Correlation Between CI WisdomTree and CI Global

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

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

Diversification Opportunities for CI WisdomTree and CI Global

0.66

Correlation Coefficient

CI WisdomTree  CI Global

Poor diversification

The 3 months correlation between JAPN and CGAA is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding CI WisdomTree Japan and CI Global Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Global Asset and CI WisdomTree 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 CI WisdomTree Japan are associated (or correlated) with CI Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Global Asset has no effect on the direction of CI WisdomTree i.e., CI WisdomTree and CI Global go up and down completely randomly.

Pair Corralation between CI WisdomTree and CI Global

Assuming the 90 days trading horizon CI WisdomTree Japan is expected to generate 2.58 times more return on investment than CI Global. However, CI WisdomTree is 2.58 times more volatile than CI Global Asset. It trades about 0.07 of its potential returns per unit of risk. CI Global Asset is currently generating about 0.17 per unit of risk. If you would invest  4,619  in CI WisdomTree Japan on September 4, 2024 and sell it today you would earn a total of  281.00  from holding CI WisdomTree Japan or generate 6.08% return on investment over 90 days.

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

CI WisdomTree Japan  vs.  CI Global Asset

CI WisdomTree Japan

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CI WisdomTree Japan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CI WisdomTree may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CI Global Asset

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CI Global Asset are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CI WisdomTree and CI Global

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

The idea behind CI WisdomTree Japan and CI Global Asset 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.