Correlation Between WisdomTree NASDAQ and IShares Edge

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both WisdomTree NASDAQ and IShares Edge 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 WisdomTree NASDAQ and IShares Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree NASDAQ 100 and iShares Edge MSCI, you can compare the effects of market volatilities on WisdomTree NASDAQ and IShares Edge 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 WisdomTree NASDAQ with a short position of IShares Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree NASDAQ and IShares Edge.

Diversification Opportunities for WisdomTree NASDAQ and IShares Edge

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between WisdomTree and IShares is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree NASDAQ 100 and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI and WisdomTree NASDAQ 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 WisdomTree NASDAQ 100 are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of WisdomTree NASDAQ i.e., WisdomTree NASDAQ and IShares Edge go up and down completely randomly.

Pair Corralation between WisdomTree NASDAQ and IShares Edge

Assuming the 90 days trading horizon WisdomTree NASDAQ 100 is expected to generate 7.02 times more return on investment than IShares Edge. However, WisdomTree NASDAQ is 7.02 times more volatile than iShares Edge MSCI. It trades about 0.03 of its potential returns per unit of risk. iShares Edge MSCI is currently generating about -0.25 per unit of risk. If you would invest  24,686  in WisdomTree NASDAQ 100 on October 3, 2024 and sell it today you would earn a total of  164.00  from holding WisdomTree NASDAQ 100 or generate 0.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

WisdomTree NASDAQ 100  vs.  iShares Edge MSCI

 Performance 
       Timeline  
WisdomTree NASDAQ 100 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree NASDAQ 100 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree NASDAQ unveiled solid returns over the last few months and may actually be approaching a breakup point.
iShares Edge MSCI 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days iShares Edge MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, IShares Edge is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree NASDAQ and IShares Edge Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WisdomTree NASDAQ and IShares Edge

The main advantage of trading using opposite WisdomTree NASDAQ and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree NASDAQ position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge's long position.
The idea behind WisdomTree NASDAQ 100 and iShares Edge MSCI 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.
Check out your portfolio center.
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

Other Complementary Tools

Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Latest Portfolios
Quick portfolio dashboard that showcases your latest portfolios
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities