Correlation Between KBND and WisdomTree Emerging

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

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

Diversification Opportunities for KBND and WisdomTree Emerging

0.85

Correlation Coefficient

KBND  WisdomTree Emerging

Very poor diversification

The 3 months correlation between KBND and WisdomTree is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding KBND and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and KBND 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 KBND are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of KBND i.e., KBND and WisdomTree Emerging go up and down completely randomly.

Pair Corralation between KBND and WisdomTree Emerging

If you would invest  3,069  in KBND on September 17, 2024 and sell it today you would earn a total of  0.00  from holding KBND or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

KBND  vs.  WisdomTree Emerging Markets

KBND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KBND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, KBND is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, WisdomTree Emerging is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KBND and WisdomTree Emerging

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

The idea behind KBND and WisdomTree Emerging Markets 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.