Correlation Between WisdomTree Emerging and Invesco CurrencyShares

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

By analyzing existing cross correlation between WisdomTree Emerging Currency and Invesco CurrencyShares Australian, you can compare the effects of market volatilities on WisdomTree Emerging and Invesco CurrencyShares 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 Invesco CurrencyShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and Invesco CurrencyShares.

Diversification Opportunities for WisdomTree Emerging and Invesco CurrencyShares

0.93

Correlation Coefficient

WisdomTree Emerging  Invesco CurrencyShares

Almost no diversification

The 3 months correlation between WisdomTree and Invesco is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Currency and Invesco CurrencyShares Austral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CurrencyShares 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 Currency are associated (or correlated) with Invesco CurrencyShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco CurrencyShares has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and Invesco CurrencyShares go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and Invesco CurrencyShares

Considering the 90-day investment horizon WisdomTree Emerging Currency is expected to generate 0.64 times more return on investment than Invesco CurrencyShares. However, WisdomTree Emerging Currency is 1.57 times less risky than Invesco CurrencyShares. It trades about -0.1 of its potential returns per unit of risk. Invesco CurrencyShares Australian is currently generating about -0.15 per unit of risk. If you would invest  1,853  in WisdomTree Emerging Currency on September 17, 2024 and sell it today you would lose (44.00) from holding WisdomTree Emerging Currency or give up 2.37% 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 Currency  vs.  Invesco CurrencyShares Austral

WisdomTree Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Emerging Currency has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, WisdomTree Emerging is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco CurrencyShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco CurrencyShares Australian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Invesco CurrencyShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree Emerging and Invesco CurrencyShares

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

The idea behind WisdomTree Emerging Currency and Invesco CurrencyShares Australian 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..