Correlation Between Global X and WisdomTree Dynamic

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

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

Diversification Opportunities for Global X and WisdomTree Dynamic

0.76

Correlation Coefficient

Global X  WisdomTree Dynamic

Poor diversification

The 3 months correlation between Global and WisdomTree is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI and WisdomTree Dynamic Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Dynamic and Global X 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 Global X MSCI are associated (or correlated) with WisdomTree Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Dynamic has no effect on the direction of Global X i.e., Global X and WisdomTree Dynamic go up and down completely randomly.

Pair Corralation between Global X and WisdomTree Dynamic

Given the investment horizon of 90 days Global X MSCI is expected to under-perform the WisdomTree Dynamic. In addition to that, Global X is 1.28 times more volatile than WisdomTree Dynamic Currency. It trades about -0.27 of its total potential returns per unit of risk. WisdomTree Dynamic Currency is currently generating about -0.01 per unit of volatility. If you would invest  3,461  in WisdomTree Dynamic Currency on October 11, 2024 and sell it today you would lose (3.00) from holding WisdomTree Dynamic Currency or give up 0.09% of portfolio value over 90 days.

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

Global X MSCI  vs.  WisdomTree Dynamic Currency

Global X MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Global X is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

WisdomTree Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Dynamic Currency has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, WisdomTree Dynamic is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and WisdomTree Dynamic

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

The idea behind Global X MSCI and WisdomTree Dynamic Currency 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.