Correlation Between IShares Core and WisdomTree Japan

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

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

Diversification Opportunities for IShares Core and WisdomTree Japan

0.59

Correlation Coefficient

IShares Core  WisdomTree Japan

Very weak diversification

The 3 months correlation between IShares and WisdomTree is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Growth and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged and IShares Core 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 iShares Core Growth are associated (or correlated) with WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan Hedged has no effect on the direction of IShares Core i.e., IShares Core and WisdomTree Japan go up and down completely randomly.

Pair Corralation between IShares Core and WisdomTree Japan

Considering the 90-day investment horizon iShares Core Growth is expected to generate 0.3 times more return on investment than WisdomTree Japan. However, iShares Core Growth is 3.33 times less risky than WisdomTree Japan. It trades about 0.13 of its potential returns per unit of risk. WisdomTree Japan Hedged is currently generating about 0.04 per unit of risk. If you would invest  5,731  in iShares Core Growth on September 3, 2024 and sell it today you would earn a total of  201.00  from holding iShares Core Growth or generate 3.51% return on investment over 90 days.

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

iShares Core Growth  vs.  WisdomTree Japan Hedged

iShares Core Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Growth are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

WisdomTree Japan Hedged

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan Hedged are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, WisdomTree Japan is not utilizing all of its potentials. The newest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with IShares Core and WisdomTree Japan

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

The idea behind iShares Core Growth and WisdomTree Japan Hedged 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.