Correlation Between Invesco FTSE and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both Invesco FTSE and WisdomTree Emerging 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 Invesco FTSE and WisdomTree Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco FTSE RAFI and WisdomTree Emerging Markets, you can compare the effects of market volatilities on Invesco FTSE and WisdomTree Emerging 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 Invesco FTSE with a short position of WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and WisdomTree Emerging.
Diversification Opportunities for Invesco FTSE and WisdomTree Emerging
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and WisdomTree is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and Invesco 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 Invesco FTSE RAFI are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between Invesco FTSE and WisdomTree Emerging
Considering the 90-day investment horizon Invesco FTSE RAFI is expected to generate 1.14 times more return on investment than WisdomTree Emerging. However, Invesco FTSE is 1.14 times more volatile than WisdomTree Emerging Markets. It trades about 0.11 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about 0.04 per unit of risk. If you would invest 1,945 in Invesco FTSE RAFI on January 29, 2024 and sell it today you would earn a total of 38.00 from holding Invesco FTSE RAFI or generate 1.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Invesco FTSE RAFI vs. WisdomTree Emerging Markets
Performance |
Timeline |
Invesco FTSE RAFI |
WisdomTree Emerging |
Invesco FTSE and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Invesco FTSE and WisdomTree Emerging
The main advantage of trading using opposite Invesco FTSE and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE position performs unexpectedly, WisdomTree Emerging 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 Emerging will offset losses from the drop in WisdomTree Emerging's long position.Invesco FTSE vs. PIMCO RAFI Dynamic | Invesco FTSE vs. PIMCO RAFI Dynamic | Invesco FTSE vs. JPMorgan Diversified Return | Invesco FTSE vs. JPMorgan Diversified Return |
WisdomTree Emerging vs. PIMCO RAFI Dynamic | WisdomTree Emerging vs. PIMCO RAFI Dynamic | WisdomTree Emerging vs. JPMorgan Diversified Return | WisdomTree Emerging vs. JPMorgan Diversified Return |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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