Correlation Between CI WisdomTree and Global X

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

By analyzing existing cross correlation between CI WisdomTree Japan and Global X NASDAQ 100, you can compare the effects of market volatilities on CI WisdomTree and Global X 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 CI WisdomTree with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI WisdomTree and Global X.

Diversification Opportunities for CI WisdomTree and Global X

0.8

Correlation Coefficient

CI WisdomTree  Global X

Very poor diversification

The 3 months correlation between JAPN and Global is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CI WisdomTree Japan and Global X NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X NASDAQ and CI WisdomTree 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 CI WisdomTree Japan are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X NASDAQ has no effect on the direction of CI WisdomTree i.e., CI WisdomTree and Global X go up and down completely randomly.

Pair Corralation between CI WisdomTree and Global X

Assuming the 90 days trading horizon CI WisdomTree is expected to generate 4.14 times less return on investment than Global X. In addition to that, CI WisdomTree is 1.13 times more volatile than Global X NASDAQ 100. It trades about 0.1 of its total potential returns per unit of risk. Global X NASDAQ 100 is currently generating about 0.47 per unit of volatility. If you would invest  8,232  in Global X NASDAQ 100 on September 17, 2024 and sell it today you would earn a total of  647.00  from holding Global X NASDAQ 100 or generate 7.86% return on investment over 90 days.

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

CI WisdomTree Japan  vs.  Global X NASDAQ 100

CI WisdomTree Japan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI WisdomTree Japan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI WisdomTree may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X NASDAQ

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X NASDAQ 100 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global X displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CI WisdomTree and Global X

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

The idea behind CI WisdomTree Japan and Global X NASDAQ 100 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.