Correlation Between Vanguard Total and WisdomTree International

Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Stock and WisdomTree International MidCap, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and WisdomTree International.

Diversification Opportunities for Vanguard Total and WisdomTree International

-0.58

Correlation Coefficient

Vanguard Total  WisdomTree International

Excellent diversification

The 3 months correlation between Vanguard and WisdomTree is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock 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 Total 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 Total Stock 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 Total i.e., Vanguard Total and WisdomTree International go up and down completely randomly.

Pair Corralation between Vanguard Total and WisdomTree International

Considering the 90-day investment horizon Vanguard Total Stock is expected to under-perform the WisdomTree International. In addition to that, Vanguard Total is 1.27 times more volatile than WisdomTree International MidCap. It trades about -0.09 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 Total Stock  vs.  WisdomTree International MidCa

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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 Total and WisdomTree International

The main advantage of trading using opposite Vanguard Total and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total Stock 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.