Correlation Between Evolve European and CI WisdomTree

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

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

Diversification Opportunities for Evolve European and CI WisdomTree

0.85

Correlation Coefficient

Evolve European  CI WisdomTree

Very poor diversification

The 3 months correlation between Evolve and JAPN is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Evolve European Banks and CI WisdomTree Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI WisdomTree Japan and Evolve European 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 Evolve European Banks are associated (or correlated) with CI WisdomTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI WisdomTree Japan has no effect on the direction of Evolve European i.e., Evolve European and CI WisdomTree go up and down completely randomly.

Pair Corralation between Evolve European and CI WisdomTree

Assuming the 90 days trading horizon Evolve European Banks is expected to generate 1.2 times more return on investment than CI WisdomTree. However, Evolve European is 1.2 times more volatile than CI WisdomTree Japan. It trades about 0.15 of its potential returns per unit of risk. CI WisdomTree Japan is currently generating about 0.11 per unit of risk. If you would invest  1,282  in Evolve European Banks on May 6, 2025 and sell it today you would earn a total of  158.00  from holding Evolve European Banks or generate 12.32% return on investment over 90 days.

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

Evolve European Banks  vs.  CI WisdomTree Japan

Evolve European Banks

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve European Banks are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Evolve European may actually be approaching a critical reversion point that can send shares even higher in September 2025.

CI WisdomTree Japan

Risk-Adjusted Performance

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 September 2025.

Pair Trading with Evolve European and CI WisdomTree

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

The idea behind Evolve European Banks and CI WisdomTree Japan 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.