Correlation Between WisdomTree Japan and IShares MSCI

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

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

Diversification Opportunities for WisdomTree Japan and IShares MSCI

-0.4

Correlation Coefficient

WisdomTree Japan  IShares MSCI

Very good diversification

The 3 months correlation between WisdomTree and IShares is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan SmallCap and iShares MSCI Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Israel and WisdomTree Japan 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 Japan SmallCap are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Israel has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and IShares MSCI go up and down completely randomly.

Pair Corralation between WisdomTree Japan and IShares MSCI

Considering the 90-day investment horizon WisdomTree Japan SmallCap is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Japan SmallCap is 1.22 times less risky than IShares MSCI. The etf trades about -0.01 of its potential returns per unit of risk. The iShares MSCI Israel is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  6,486  in iShares MSCI Israel on September 12, 2024 and sell it today you would earn a total of  1,209  from holding iShares MSCI Israel or generate 18.64% return on investment over 90 days.

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

WisdomTree Japan SmallCap  vs.  iShares MSCI Israel

WisdomTree Japan SmallCap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Japan SmallCap has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady technical and fundamental indicators, WisdomTree Japan is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

iShares MSCI Israel

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Israel are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, IShares MSCI unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Japan and IShares MSCI

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

The idea behind WisdomTree Japan SmallCap and iShares MSCI Israel 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.

Check out your portfolio center.

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..