Correlation Between WisdomTree New and Avantis Emerging

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

By analyzing existing cross correlation between WisdomTree New Economy and Avantis Emerging Markets, you can compare the effects of market volatilities on WisdomTree New and Avantis Emerging 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 WisdomTree New with a short position of Avantis Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree New and Avantis Emerging.

Diversification Opportunities for WisdomTree New and Avantis Emerging

0.86

Correlation Coefficient

WisdomTree New  Avantis Emerging

Very poor diversification

The 3 months correlation between WisdomTree and Avantis is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree New Economy and Avantis Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Emerging Markets and WisdomTree New 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 WisdomTree New Economy are associated (or correlated) with Avantis Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Emerging Markets has no effect on the direction of WisdomTree New i.e., WisdomTree New and Avantis Emerging go up and down completely randomly.

Pair Corralation between WisdomTree New and Avantis Emerging

Given the investment horizon of 90 days WisdomTree New Economy is expected to generate 1.34 times more return on investment than Avantis Emerging. However, WisdomTree New is 1.34 times more volatile than Avantis Emerging Markets. It trades about 0.16 of its potential returns per unit of risk. Avantis Emerging Markets is currently generating about -0.02 per unit of risk. If you would invest  1,696  in WisdomTree New Economy on October 20, 2024 and sell it today you would earn a total of  53.00  from holding WisdomTree New Economy or generate 3.12% return on investment over 90 days.

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

WisdomTree New Economy  vs.  Avantis Emerging Markets

WisdomTree New Economy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree New Economy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Avantis Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Avantis Emerging is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree New and Avantis Emerging

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

The idea behind WisdomTree New Economy and Avantis Emerging Markets 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.