Correlation Between WisdomTree Emerging and Avantis Emerging

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

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

Diversification Opportunities for WisdomTree Emerging and Avantis Emerging

0.99

Correlation Coefficient

WisdomTree Emerging  Avantis Emerging

No risk reduction

The 3 months correlation between WisdomTree and Avantis is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and Avantis Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Emerging Markets and WisdomTree Emerging 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 Emerging Markets are associated (or correlated) with Avantis Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Emerging Markets has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and Avantis Emerging go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and Avantis Emerging

Considering the 90-day investment horizon WisdomTree Emerging is expected to generate 1.2 times less return on investment than Avantis Emerging. But when comparing it to its historical volatility, WisdomTree Emerging Markets is 1.04 times less risky than Avantis Emerging. It trades about 0.26 of its potential returns per unit of risk. Avantis Emerging Markets is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  4,709  in Avantis Emerging Markets on April 30, 2025 and sell it today you would earn a total of  781.00  from holding Avantis Emerging Markets or generate 16.59% return on investment over 90 days.

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

WisdomTree Emerging Markets  vs.  Avantis Emerging Markets

WisdomTree Emerging

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Markets are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, WisdomTree Emerging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Avantis Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Emerging Markets are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Avantis Emerging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Emerging and Avantis Emerging

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

The idea behind WisdomTree Emerging Markets and Avantis Emerging Markets 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.