Correlation Between Vanguard Mid and WisdomTree International

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

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

Diversification Opportunities for Vanguard Mid and WisdomTree International

-0.41

Correlation Coefficient

Vanguard Mid  WisdomTree International

Very good diversification

The 3 months correlation between Vanguard and WisdomTree is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and WisdomTree International MidCa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and Vanguard Mid 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 Vanguard Mid Cap Index 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 Vanguard Mid i.e., Vanguard Mid and WisdomTree International go up and down completely randomly.

Pair Corralation between Vanguard Mid and WisdomTree International

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to under-perform the WisdomTree International. In addition to that, Vanguard Mid is 1.14 times more volatile than WisdomTree International MidCap. It trades about -0.03 of its total potential returns per unit of risk. WisdomTree International MidCap is currently generating about 0.2 per unit of volatility. If you would invest  6,057  in WisdomTree International MidCap on December 30, 2024 and sell it today you would earn a total of  618.00  from holding WisdomTree International MidCap or generate 10.2% return on investment over 90 days.

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

Vanguard Mid Cap Index  vs.  WisdomTree International MidCa

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

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

WisdomTree International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International MidCap are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward indicators, WisdomTree International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard Mid and WisdomTree International

The main advantage of trading using opposite Vanguard Mid and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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 Vanguard Mid Cap Index and WisdomTree International MidCap 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.