Correlation Between Vanguard FTSE and WisdomTree Europe

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

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

Diversification Opportunities for Vanguard FTSE and WisdomTree Europe

0.78

Correlation Coefficient

Vanguard FTSE  WisdomTree Europe

Poor diversification

The 3 months correlation between Vanguard and WisdomTree is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Pacific and WisdomTree Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Quality and Vanguard FTSE 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 Vanguard FTSE Pacific are associated (or correlated) with WisdomTree Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Quality has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and WisdomTree Europe go up and down completely randomly.

Pair Corralation between Vanguard FTSE and WisdomTree Europe

Considering the 90-day investment horizon Vanguard FTSE Pacific is expected to generate 1.01 times more return on investment than WisdomTree Europe. However, Vanguard FTSE is 1.01 times more volatile than WisdomTree Europe Quality. It trades about -0.03 of its potential returns per unit of risk. WisdomTree Europe Quality is currently generating about -0.12 per unit of risk. If you would invest  7,600  in Vanguard FTSE Pacific on September 13, 2024 and sell it today you would lose (139.00) from holding Vanguard FTSE Pacific or give up 1.83% of portfolio value over 90 days.

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

Vanguard FTSE Pacific  vs.  WisdomTree Europe Quality

Vanguard FTSE Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Vanguard FTSE is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 unsteady 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.

Pair Trading with Vanguard FTSE and WisdomTree Europe

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

The idea behind Vanguard FTSE Pacific and WisdomTree Europe Quality 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.