Correlation Between Wilshire Income and Wilshire International

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

By analyzing existing cross correlation between Wilshire Income Opport and Wilshire International Equity, you can compare the effects of market volatilities on Wilshire Income and Wilshire 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 Wilshire Income with a short position of Wilshire International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilshire Income and Wilshire International.

Diversification Opportunities for Wilshire Income and Wilshire International

0.92

Correlation Coefficient

Wilshire Income  Wilshire International

Almost no diversification

The 3 months correlation between Wilshire and Wilshire is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Wilshire Income Opport and Wilshire International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire International and Wilshire Income 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 Wilshire Income Opport are associated (or correlated) with Wilshire International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire International has no effect on the direction of Wilshire Income i.e., Wilshire Income and Wilshire International go up and down completely randomly.

Pair Corralation between Wilshire Income and Wilshire International

Assuming the 90 days horizon Wilshire Income is expected to generate 4.77 times less return on investment than Wilshire International. But when comparing it to its historical volatility, Wilshire Income Opport is 4.64 times less risky than Wilshire International. It trades about 0.17 of its potential returns per unit of risk. Wilshire International Equity is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,013  in Wilshire International Equity on December 30, 2024 and sell it today you would earn a total of  94.00  from holding Wilshire International Equity or generate 9.28% return on investment over 90 days.

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

Wilshire Income Opport  vs.  Wilshire International Equity

Wilshire Income Opport

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wilshire Income Opport are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wilshire Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wilshire International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wilshire International Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Wilshire International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wilshire Income and Wilshire International

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

The idea behind Wilshire Income Opport and Wilshire International Equity 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.