Correlation Between Invesco International and WisdomTree International

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

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

Diversification Opportunities for Invesco International and WisdomTree International

0.91

Correlation Coefficient

Invesco International  WisdomTree International

Almost no diversification

The 3 months correlation between Invesco and WisdomTree is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International Dividend and WisdomTree International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and Invesco International 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 Invesco International Dividend are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of Invesco International i.e., Invesco International and WisdomTree International go up and down completely randomly.

Pair Corralation between Invesco International and WisdomTree International

Considering the 90-day investment horizon Invesco International is expected to generate 1.98 times less return on investment than WisdomTree International. But when comparing it to its historical volatility, Invesco International Dividend is 1.22 times less risky than WisdomTree International. It trades about 0.13 of its potential returns per unit of risk. WisdomTree International Equity is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,258  in WisdomTree International Equity on December 30, 2024 and sell it today you would earn a total of  581.00  from holding WisdomTree International Equity or generate 11.05% return on investment over 90 days.

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

Invesco International Dividend  vs.  WisdomTree International Equit

Invesco International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco International Dividend are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Invesco International is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Equity are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, WisdomTree International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Invesco International and WisdomTree International

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

The idea behind Invesco International Dividend and WisdomTree International Equity 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.