Correlation Between WisdomTree Emerging and IShares 1

Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and IShares 1 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 1 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 1 5 Year, you can compare the effects of market volatilities on WisdomTree Emerging and IShares 1 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 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and IShares 1.

Diversification Opportunities for WisdomTree Emerging and IShares 1

0.69

Correlation Coefficient

WisdomTree Emerging  IShares 1

Poor diversification

The 3 months correlation between WisdomTree and IShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and iShares 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 5 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 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 1 5 has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and IShares 1 go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and IShares 1

Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to generate about the same return on investment as iShares 1 5 Year. However, WisdomTree Emerging is 2.31 times more volatile than iShares 1 5 Year. It trades about 0.05 of its potential returns per unit of risk. iShares 1 5 Year is currently producing about 0.12 per unit of risk. If you would invest  5,183  in iShares 1 5 Year on August 31, 2024 and sell it today you would earn a total of  21.00  from holding iShares 1 5 Year or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

WisdomTree Emerging Markets  vs.  iShares 1 5 Year

WisdomTree Emerging

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Markets are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, WisdomTree Emerging is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares 1 5

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 5 Year are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares 1 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 IShares 1

The main advantage of trading using opposite WisdomTree Emerging and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, IShares 1 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 1 will offset losses from the drop in IShares 1's long position.

The idea behind WisdomTree Emerging Markets and iShares 1 5 Year 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.