Correlation Between Wilshire International and Wilshire 5000

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Can any of the company-specific risk be diversified away by investing in both Wilshire International and Wilshire 5000 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 International and Wilshire 5000 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wilshire International Equity and Wilshire 5000 Index, you can compare the effects of market volatilities on Wilshire International and Wilshire 5000 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 International with a short position of Wilshire 5000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilshire International and Wilshire 5000.

Diversification Opportunities for Wilshire International and Wilshire 5000

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Wilshire and Wilshire is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Wilshire International Equity and Wilshire 5000 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire 5000 Index and Wilshire International 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 International Equity are associated (or correlated) with Wilshire 5000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire 5000 Index has no effect on the direction of Wilshire International i.e., Wilshire International and Wilshire 5000 go up and down completely randomly.

Pair Corralation between Wilshire International and Wilshire 5000

Assuming the 90 days horizon Wilshire International Equity is expected to under-perform the Wilshire 5000. But the mutual fund apears to be less risky and, when comparing its historical volatility, Wilshire International Equity is 1.0 times less risky than Wilshire 5000. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Wilshire 5000 Index is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,142  in Wilshire 5000 Index on September 5, 2024 and sell it today you would earn a total of  342.00  from holding Wilshire 5000 Index or generate 10.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Wilshire International Equity  vs.  Wilshire 5000 Index

 Performance 
       Timeline  
Wilshire International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Wilshire International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wilshire International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Wilshire 5000 Index 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Wilshire 5000 Index are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wilshire 5000 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wilshire International and Wilshire 5000 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wilshire International and Wilshire 5000

The main advantage of trading using opposite Wilshire International and Wilshire 5000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilshire International position performs unexpectedly, Wilshire 5000 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 5000 will offset losses from the drop in Wilshire 5000's long position.
The idea behind Wilshire International Equity and Wilshire 5000 Index 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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