Correlation Between IShares Core and WisdomTree Carbon

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

By analyzing existing cross correlation between iShares Core MSCI and WisdomTree Carbon, you can compare the effects of market volatilities on IShares Core and WisdomTree Carbon 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 IShares Core with a short position of WisdomTree Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and WisdomTree Carbon.

Diversification Opportunities for IShares Core and WisdomTree Carbon

-0.39

Correlation Coefficient

IShares Core  WisdomTree Carbon

Very good diversification

The 3 months correlation between IShares and WisdomTree is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and WisdomTree Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Carbon and IShares Core 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 iShares Core MSCI are associated (or correlated) with WisdomTree Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Carbon has no effect on the direction of IShares Core i.e., IShares Core and WisdomTree Carbon go up and down completely randomly.

Pair Corralation between IShares Core and WisdomTree Carbon

Assuming the 90 days trading horizon iShares Core MSCI is expected to under-perform the WisdomTree Carbon. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core MSCI is 2.28 times less risky than WisdomTree Carbon. The etf trades about -0.01 of its potential returns per unit of risk. The WisdomTree Carbon is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,147  in WisdomTree Carbon on September 26, 2024 and sell it today you would earn a total of  67.00  from holding WisdomTree Carbon or generate 3.12% return on investment over 90 days.

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

iShares Core MSCI  vs.  WisdomTree Carbon

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

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

WisdomTree Carbon

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Carbon are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, WisdomTree Carbon is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and WisdomTree Carbon

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

The idea behind iShares Core MSCI and WisdomTree Carbon 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.