Correlation Between SHP ETF and WisdomTree Emerging

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

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

Diversification Opportunities for SHP ETF and WisdomTree Emerging

-0.71

Correlation Coefficient

SHP ETF  WisdomTree Emerging

Pay attention - limited upside

The 3 months correlation between SHP and WisdomTree is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding SHP ETF Trust and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and SHP ETF 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 SHP ETF Trust are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of SHP ETF i.e., SHP ETF and WisdomTree Emerging go up and down completely randomly.

Pair Corralation between SHP ETF and WisdomTree Emerging

Given the investment horizon of 90 days SHP ETF Trust is expected to generate 0.07 times more return on investment than WisdomTree Emerging. However, SHP ETF Trust is 14.27 times less risky than WisdomTree Emerging. It trades about 0.49 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about -0.06 per unit of risk. If you would invest  4,912  in SHP ETF Trust on August 30, 2024 and sell it today you would earn a total of  73.00  from holding SHP ETF Trust or generate 1.49% return on investment over 90 days.

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

SHP ETF Trust  vs.  WisdomTree Emerging Markets

SHP ETF Trust

Risk-Adjusted Performance

38 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SHP ETF Trust are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, SHP ETF is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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 essential indicators, WisdomTree Emerging is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SHP ETF and WisdomTree Emerging

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

The idea behind SHP ETF Trust and WisdomTree 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..