Correlation Between CI WisdomTree and IShares Global

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

Diversification Opportunities for CI WisdomTree and IShares Global

-0.24

Correlation Coefficient

CI WisdomTree  IShares Global

Very good diversification

The 3 months correlation between JAPN and IShares is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding CI WisdomTree Japan and iShares Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Real 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Real has no effect on the direction of CI WisdomTree i.e., CI WisdomTree and IShares Global go up and down completely randomly.

Pair Corralation between CI WisdomTree and IShares Global

Assuming the 90 days trading horizon CI WisdomTree Japan is expected to generate 1.24 times more return on investment than IShares Global. However, CI WisdomTree is 1.24 times more volatile than iShares Global Real. It trades about 0.07 of its potential returns per unit of risk. iShares Global Real is currently generating about -0.06 per unit of risk. If you would invest  4,827  in CI WisdomTree Japan on October 5, 2024 and sell it today you would earn a total of  186.00  from holding CI WisdomTree Japan or generate 3.85% return on investment over 90 days.

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

CI WisdomTree Japan  vs.  iShares Global Real

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 healthy basic indicators, CI WisdomTree is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares 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 IShares Global

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

The idea behind CI WisdomTree Japan and iShares Global Real 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.