Correlation Between ProShares MSCI and WisdomTree Emerging

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

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

Diversification Opportunities for ProShares MSCI and WisdomTree Emerging

0.55

Correlation Coefficient

ProShares MSCI  WisdomTree Emerging

Very weak diversification

The 3 months correlation between ProShares and WisdomTree is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ProShares MSCI EAFE and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and ProShares MSCI 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 ProShares MSCI EAFE 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 ProShares MSCI i.e., ProShares MSCI and WisdomTree Emerging go up and down completely randomly.

Pair Corralation between ProShares MSCI and WisdomTree Emerging

Given the investment horizon of 90 days ProShares MSCI is expected to generate 1.72 times less return on investment than WisdomTree Emerging. But when comparing it to its historical volatility, ProShares MSCI EAFE is 1.04 times less risky than WisdomTree Emerging. It trades about 0.08 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,626  in WisdomTree Emerging Markets on May 13, 2025 and sell it today you would earn a total of  158.00  from holding WisdomTree Emerging Markets or generate 6.02% return on investment over 90 days.

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

ProShares MSCI EAFE  vs.  WisdomTree Emerging Markets

ProShares MSCI EAFE

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares MSCI EAFE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ProShares MSCI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree Emerging

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Markets are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, WisdomTree Emerging is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ProShares MSCI and WisdomTree Emerging

The main advantage of trading using opposite ProShares MSCI and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares MSCI 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.

The idea behind ProShares MSCI EAFE and WisdomTree 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.