Correlation Between WisdomTree NASDAQ and IShares Edge
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 Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
WisdomTree NASDAQ 100 vs. iShares Edge MSCI
Performance |
Timeline |
WisdomTree NASDAQ 100 |
iShares Edge MSCI |
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.WisdomTree NASDAQ vs. Leverage Shares 3x | WisdomTree NASDAQ vs. WisdomTree Natural Gas | WisdomTree NASDAQ vs. GraniteShares 3x Short | WisdomTree NASDAQ vs. WisdomTree Natural Gas |
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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.
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