Correlation Between Defiance Quantum and WisdomTree Emerging

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

By analyzing existing cross correlation between Defiance Quantum ETF and WisdomTree Emerging Markets, you can compare the effects of market volatilities on Defiance Quantum and WisdomTree Emerging 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 Defiance Quantum with a short position of WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defiance Quantum and WisdomTree Emerging.

Diversification Opportunities for Defiance Quantum and WisdomTree Emerging

-0.66

Correlation Coefficient

Defiance Quantum  WisdomTree Emerging

Excellent diversification

The 3 months correlation between Defiance and WisdomTree is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Quantum ETF and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and Defiance Quantum 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 Defiance Quantum ETF are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of Defiance Quantum i.e., Defiance Quantum and WisdomTree Emerging go up and down completely randomly.

Pair Corralation between Defiance Quantum and WisdomTree Emerging

Given the investment horizon of 90 days Defiance Quantum ETF is expected to generate 4.39 times more return on investment than WisdomTree Emerging. However, Defiance Quantum is 4.39 times more volatile than WisdomTree Emerging Markets. It trades about 0.25 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about -0.19 per unit of risk. If you would invest  7,149  in Defiance Quantum ETF on October 5, 2024 and sell it today you would earn a total of  1,210  from holding Defiance Quantum ETF or generate 16.93% return on investment over 90 days.

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

Defiance Quantum ETF  vs.  WisdomTree Emerging Markets

Defiance Quantum ETF

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Quantum ETF are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Defiance Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, WisdomTree Emerging is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Defiance Quantum and WisdomTree Emerging

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

The idea behind Defiance Quantum ETF and WisdomTree Emerging Markets 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.