Correlation Between WisdomTree Emerging and IShares ESG

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

Diversification Opportunities for WisdomTree Emerging and IShares ESG

0.63

Correlation Coefficient

WisdomTree Emerging  IShares ESG

Poor diversification

The 3 months correlation between WisdomTree and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and iShares ESG Advanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Advanced 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Advanced has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and IShares ESG go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and IShares ESG

Considering the 90-day investment horizon WisdomTree Emerging Markets is expected to under-perform the IShares ESG. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Emerging Markets is 1.42 times less risky than IShares ESG. The etf trades about -0.02 of its potential returns per unit of risk. The iShares ESG Advanced is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,749  in iShares ESG Advanced on September 4, 2024 and sell it today you would earn a total of  130.00  from holding iShares ESG Advanced or generate 3.47% return on investment over 90 days.

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

WisdomTree Emerging Markets  vs.  iShares ESG Advanced

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 comparatively stable technical and fundamental indicators, WisdomTree Emerging is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares ESG Advanced

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Advanced are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WisdomTree Emerging and IShares ESG

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

The idea behind WisdomTree Emerging Markets and iShares ESG Advanced 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..