Correlation Between WisdomTree NASDAQ and IShares Global

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

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

Diversification Opportunities for WisdomTree NASDAQ and IShares Global

-0.63

Correlation Coefficient

WisdomTree NASDAQ  IShares Global

Excellent diversification

The 3 months correlation between WisdomTree and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree NASDAQ 100 and iShares Global Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Corp and WisdomTree NASDAQ 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 NASDAQ 100 are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Corp has no effect on the direction of WisdomTree NASDAQ i.e., WisdomTree NASDAQ and IShares Global go up and down completely randomly.

Pair Corralation between WisdomTree NASDAQ and IShares Global

Assuming the 90 days trading horizon WisdomTree NASDAQ 100 is expected to generate 9.38 times more return on investment than IShares Global. However, WisdomTree NASDAQ is 9.38 times more volatile than iShares Global Corp. It trades about 0.12 of its potential returns per unit of risk. iShares Global Corp is currently generating about -0.02 per unit of risk. If you would invest  19,385  in WisdomTree NASDAQ 100 on September 3, 2024 and sell it today you would earn a total of  4,640  from holding WisdomTree NASDAQ 100 or generate 23.94% return on investment over 90 days.

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

WisdomTree NASDAQ 100  vs.  iShares Global Corp

WisdomTree NASDAQ 100

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree NASDAQ 100 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree NASDAQ unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares Global Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WisdomTree NASDAQ and IShares Global

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

The idea behind WisdomTree NASDAQ 100 and iShares Global Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.