Correlation Between WisdomTree Emerging and NuShares ETF

Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and NuShares ETF 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 NuShares ETF 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 NuShares ETF Trust, you can compare the effects of market volatilities on WisdomTree Emerging and NuShares ETF 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 NuShares ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and NuShares ETF.

Diversification Opportunities for WisdomTree Emerging and NuShares ETF

0.97

Correlation Coefficient

WisdomTree Emerging  NuShares ETF

Almost no diversification

The 3 months correlation between WisdomTree and NuShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and NuShares ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuShares ETF Trust 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 NuShares ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuShares ETF Trust has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and NuShares ETF go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and NuShares ETF

Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to under-perform the NuShares ETF. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Emerging Markets is 1.05 times less risky than NuShares ETF. The etf trades about -0.3 of its potential returns per unit of risk. The NuShares ETF Trust is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  3,003  in NuShares ETF Trust on October 12, 2024 and sell it today you would lose (104.00) from holding NuShares ETF Trust or give up 3.46% of portfolio value over 90 days.

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

WisdomTree Emerging Markets  vs.  NuShares ETF Trust

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 latest unsteady 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.

NuShares ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NuShares ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with WisdomTree Emerging and NuShares ETF

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

The idea behind WisdomTree Emerging Markets and NuShares ETF Trust 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.