Correlation Between ProShares MSCI and WisdomTree Europe

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

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

Diversification Opportunities for ProShares MSCI and WisdomTree Europe

0.94

Correlation Coefficient

ProShares MSCI  WisdomTree Europe

Almost no diversification

The 3 months correlation between ProShares and WisdomTree is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ProShares MSCI Europe 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 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 Europe 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 ProShares MSCI i.e., ProShares MSCI and WisdomTree Europe go up and down completely randomly.

Pair Corralation between ProShares MSCI and WisdomTree Europe

Given the investment horizon of 90 days ProShares MSCI Europe is expected to under-perform the WisdomTree Europe. But the etf apears to be less risky and, when comparing its historical volatility, ProShares MSCI Europe is 1.01 times less risky than WisdomTree Europe. The etf trades about -0.03 of its potential returns per unit of risk. The WisdomTree Europe Quality is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,362  in WisdomTree Europe Quality on May 2, 2025 and sell it today you would lose (33.00) from holding WisdomTree Europe Quality or give up 0.98% of portfolio value over 90 days.

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

ProShares MSCI Europe  vs.  WisdomTree Europe Quality

ProShares MSCI Europe

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, ProShares MSCI is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WisdomTree Europe Quality

Risk-Adjusted Performance

Weak

Over the last 90 days WisdomTree Europe Quality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, WisdomTree Europe is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProShares MSCI and WisdomTree Europe

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

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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.