Correlation Between WisdomTree International and Wahed Dow

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

By analyzing existing cross correlation between WisdomTree International Hedged and Wahed Dow Jones, you can compare the effects of market volatilities on WisdomTree International and Wahed Dow 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 International with a short position of Wahed Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and Wahed Dow.

Diversification Opportunities for WisdomTree International and Wahed Dow

0.93

Correlation Coefficient

WisdomTree International  Wahed Dow

Almost no diversification

The 3 months correlation between WisdomTree and Wahed is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and Wahed Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wahed Dow Jones and WisdomTree International 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 International Hedged are associated (or correlated) with Wahed Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wahed Dow Jones has no effect on the direction of WisdomTree International i.e., WisdomTree International and Wahed Dow go up and down completely randomly.

Pair Corralation between WisdomTree International and Wahed Dow

Given the investment horizon of 90 days WisdomTree International Hedged is expected to under-perform the Wahed Dow. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree International Hedged is 1.34 times less risky than Wahed Dow. The etf trades about -0.04 of its potential returns per unit of risk. The Wahed Dow Jones is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,466  in Wahed Dow Jones on September 2, 2024 and sell it today you would lose (26.00) from holding Wahed Dow Jones or give up 1.05% of portfolio value over 90 days.

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

WisdomTree International Hedge  vs.  Wahed Dow Jones

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, WisdomTree International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Wahed Dow Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wahed Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Wahed Dow is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree International and Wahed Dow

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

The idea behind WisdomTree International Hedged and Wahed Dow Jones 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.