Correlation Between Wealthsimple Developed and Wealthsimple North

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

Diversification Opportunities for Wealthsimple Developed and Wealthsimple North

WealthsimpleWealthsimpleDiversified AwayWealthsimpleWealthsimpleDiversified Away100%
0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Wealthsimple and Wealthsimple is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Wealthsimple Developed Markets and Wealthsimple North America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealthsimple North and Wealthsimple Developed 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 Wealthsimple Developed Markets are associated (or correlated) with Wealthsimple North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealthsimple North has no effect on the direction of Wealthsimple Developed i.e., Wealthsimple Developed and Wealthsimple North go up and down completely randomly.

Pair Corralation between Wealthsimple Developed and Wealthsimple North

Assuming the 90 days trading horizon Wealthsimple Developed Markets is expected to generate 1.04 times more return on investment than Wealthsimple North. However, Wealthsimple Developed is 1.04 times more volatile than Wealthsimple North America. It trades about 0.22 of its potential returns per unit of risk. Wealthsimple North America is currently generating about 0.01 per unit of risk. If you would invest  2,872  in Wealthsimple Developed Markets on November 22, 2024 and sell it today you would earn a total of  255.00  from holding Wealthsimple Developed Markets or generate 8.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.36%
ValuesDaily Returns

Wealthsimple Developed Markets  vs.  Wealthsimple North America

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -202468
JavaScript chart by amCharts 3.21.15WSRD WSRI
       Timeline  
Wealthsimple Developed 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple Developed Markets are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Wealthsimple Developed may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2929.53030.53131.5
Wealthsimple North 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Wealthsimple North America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Wealthsimple North is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb4343.54444.54545.5

Wealthsimple Developed and Wealthsimple North Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.88-1.37-0.86-0.350.110.621.131.642.15 0.20.40.60.81.01.2
JavaScript chart by amCharts 3.21.15WSRD WSRI
       Returns  

Pair Trading with Wealthsimple Developed and Wealthsimple North

The main advantage of trading using opposite Wealthsimple Developed and Wealthsimple North positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wealthsimple Developed position performs unexpectedly, Wealthsimple North 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 Wealthsimple North will offset losses from the drop in Wealthsimple North's long position.
The idea behind Wealthsimple Developed Markets and Wealthsimple North America 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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