Correlation Between WisdomTree Emerging and IShares ESG

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

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

Diversification Opportunities for WisdomTree Emerging and IShares ESG

1.0

Correlation Coefficient

WisdomTree Emerging  IShares ESG

No risk reduction

The 3 months correlation between WisdomTree and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware and WisdomTree Emerging 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 Emerging Markets are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and IShares ESG go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and IShares ESG

Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to generate 1.0 times more return on investment than IShares ESG. However, WisdomTree Emerging is 1.0 times more volatile than iShares ESG Aware. It trades about 0.03 of its potential returns per unit of risk. iShares ESG Aware is currently generating about 0.03 per unit of risk. If you would invest  2,704  in WisdomTree Emerging Markets on September 25, 2024 and sell it today you would earn a total of  410.00  from holding WisdomTree Emerging Markets or generate 15.16% return on investment over 90 days.

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

WisdomTree Emerging Markets  vs.  iShares ESG Aware

WisdomTree Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, WisdomTree Emerging is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares ESG Aware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares ESG Aware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree Emerging and IShares ESG

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

The idea behind WisdomTree Emerging Markets and iShares ESG Aware 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.