Correlation Between IShares MSCI and WisdomTree MidCap

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

By analyzing existing cross correlation between iShares MSCI China and WisdomTree MidCap Dividend, you can compare the effects of market volatilities on IShares MSCI and WisdomTree MidCap 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 MSCI with a short position of WisdomTree MidCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and WisdomTree MidCap.

Diversification Opportunities for IShares MSCI and WisdomTree MidCap

-0.36

Correlation Coefficient

IShares MSCI  WisdomTree MidCap

Very good diversification

The 3 months correlation between IShares and WisdomTree is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and WisdomTree MidCap Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree MidCap and IShares MSCI 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 MSCI China are associated (or correlated) with WisdomTree MidCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree MidCap has no effect on the direction of IShares MSCI i.e., IShares MSCI and WisdomTree MidCap go up and down completely randomly.

Pair Corralation between IShares MSCI and WisdomTree MidCap

Given the investment horizon of 90 days iShares MSCI China is expected to generate 2.35 times more return on investment than WisdomTree MidCap. However, IShares MSCI is 2.35 times more volatile than WisdomTree MidCap Dividend. It trades about 0.03 of its potential returns per unit of risk. WisdomTree MidCap Dividend is currently generating about -0.29 per unit of risk. If you would invest  4,670  in iShares MSCI China on September 22, 2024 and sell it today you would earn a total of  40.00  from holding iShares MSCI China or generate 0.86% return on investment over 90 days.

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

iShares MSCI China  vs.  WisdomTree MidCap Dividend

iShares MSCI China

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree MidCap

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree MidCap Dividend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, WisdomTree MidCap is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and WisdomTree MidCap

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

The idea behind iShares MSCI China and WisdomTree MidCap Dividend 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.