Correlation Between Amg Gwk and WisdomTree Japan

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

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

Diversification Opportunities for Amg Gwk and WisdomTree Japan

0.87

Correlation Coefficient

Amg Gwk  WisdomTree Japan

Very poor diversification

The 3 months correlation between Amg and WisdomTree is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Amg Gwk E and WisdomTree Japan SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan SmallCap and Amg Gwk 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 Amg Gwk E are associated (or correlated) with WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan SmallCap has no effect on the direction of Amg Gwk i.e., Amg Gwk and WisdomTree Japan go up and down completely randomly.

Pair Corralation between Amg Gwk and WisdomTree Japan

Assuming the 90 days horizon Amg Gwk is expected to generate 4.87 times less return on investment than WisdomTree Japan. But when comparing it to its historical volatility, Amg Gwk E is 2.52 times less risky than WisdomTree Japan. It trades about 0.07 of its potential returns per unit of risk. WisdomTree Japan SmallCap is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,518  in WisdomTree Japan SmallCap on December 28, 2024 and sell it today you would earn a total of  509.00  from holding WisdomTree Japan SmallCap or generate 6.77% return on investment over 90 days.

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

Amg Gwk E  vs.  WisdomTree Japan SmallCap

Amg Gwk E

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amg Gwk E are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Amg Gwk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree Japan SmallCap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan SmallCap are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, WisdomTree Japan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Amg Gwk and WisdomTree Japan

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

The idea behind Amg Gwk E and WisdomTree Japan SmallCap 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.