Correlation Between WisdomTree Emerging and FlexShares Morningstar

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

Diversification Opportunities for WisdomTree Emerging and FlexShares Morningstar

0.74

Correlation Coefficient

WisdomTree Emerging  FlexShares Morningstar

Poor diversification

The 3 months correlation between WisdomTree and FlexShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and FlexShares Morningstar Emergin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Morningstar 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 FlexShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Morningstar has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and FlexShares Morningstar go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and FlexShares Morningstar

Considering the 90-day investment horizon WisdomTree Emerging Markets is expected to under-perform the FlexShares Morningstar. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Emerging Markets is 1.41 times less risky than FlexShares Morningstar. The etf trades about -0.21 of its potential returns per unit of risk. The FlexShares Morningstar Emerging is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  5,709  in FlexShares Morningstar Emerging on August 30, 2024 and sell it today you would lose (344.00) from holding FlexShares Morningstar Emerging or give up 6.03% of portfolio value over 90 days.

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

WisdomTree Emerging Markets  vs.  FlexShares Morningstar Emergin

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.

FlexShares Morningstar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Morningstar Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FlexShares Morningstar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree Emerging and FlexShares Morningstar

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

The idea behind WisdomTree Emerging Markets and FlexShares Morningstar Emerging 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.