Correlation Between Vanguard Total and WisdomTree Emerging

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

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

Diversification Opportunities for Vanguard Total and WisdomTree Emerging

0.97

Correlation Coefficient

Vanguard Total  WisdomTree Emerging

Almost no diversification

The 3 months correlation between Vanguard and WisdomTree is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total World and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and Vanguard Total 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 Vanguard Total World 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 Vanguard Total i.e., Vanguard Total and WisdomTree Emerging go up and down completely randomly.

Pair Corralation between Vanguard Total and WisdomTree Emerging

Allowing for the 90-day total investment horizon Vanguard Total World is expected to generate 0.76 times more return on investment than WisdomTree Emerging. However, Vanguard Total World is 1.32 times less risky than WisdomTree Emerging. It trades about 0.29 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about 0.2 per unit of risk. If you would invest  11,646  in Vanguard Total World on May 1, 2025 and sell it today you would earn a total of  1,462  from holding Vanguard Total World or generate 12.55% return on investment over 90 days.

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

Vanguard Total World  vs.  WisdomTree Emerging Markets

Vanguard Total World

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total World are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in August 2025.

WisdomTree Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Markets are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, WisdomTree Emerging may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Vanguard Total and WisdomTree Emerging

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

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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.