Correlation Between WisdomTree Europe and BNY Mellon

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

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

Diversification Opportunities for WisdomTree Europe and BNY Mellon

0.98

Correlation Coefficient

WisdomTree Europe  BNY Mellon

Almost no diversification

The 3 months correlation between WisdomTree and BNY is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Quality and BNY Mellon ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon ETF and WisdomTree Europe 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 Europe Quality are associated (or correlated) with BNY Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNY Mellon ETF has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and BNY Mellon go up and down completely randomly.

Pair Corralation between WisdomTree Europe and BNY Mellon

Given the investment horizon of 90 days WisdomTree Europe Quality is expected to under-perform the BNY Mellon. In addition to that, WisdomTree Europe is 1.06 times more volatile than BNY Mellon ETF. It trades about -0.18 of its total potential returns per unit of risk. BNY Mellon ETF is currently generating about -0.16 per unit of volatility. If you would invest  5,273  in BNY Mellon ETF on September 20, 2024 and sell it today you would lose (428.14) from holding BNY Mellon ETF or give up 8.12% of portfolio value over 90 days.

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

WisdomTree Europe Quality  vs.  BNY Mellon ETF

WisdomTree Europe Quality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Europe Quality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

BNY Mellon ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNY Mellon ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with WisdomTree Europe and BNY Mellon

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

The idea behind WisdomTree Europe Quality and BNY Mellon ETF 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 Commodity Directory module to find actively traded commodities issued by global exchanges.