Correlation Between WisdomTree Asia and Banking Fund

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

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

Diversification Opportunities for WisdomTree Asia and Banking Fund

-0.45

Correlation Coefficient

WisdomTree Asia  Banking Fund

Very good diversification

The 3 months correlation between WisdomTree and Banking is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Asia Defense and Banking Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Investor and WisdomTree Asia 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 Asia Defense are associated (or correlated) with Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Investor has no effect on the direction of WisdomTree Asia i.e., WisdomTree Asia and Banking Fund go up and down completely randomly.

Pair Corralation between WisdomTree Asia and Banking Fund

Given the investment horizon of 90 days WisdomTree Asia Defense is expected to under-perform the Banking Fund. In addition to that, WisdomTree Asia is 1.16 times more volatile than Banking Fund Investor. It trades about -0.11 of its total potential returns per unit of risk. Banking Fund Investor is currently generating about 0.09 per unit of volatility. If you would invest  11,763  in Banking Fund Investor on September 12, 2025 and sell it today you would earn a total of  783.00  from holding Banking Fund Investor or generate 6.66% return on investment over 90 days.

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

WisdomTree Asia Defense  vs.  Banking Fund Investor

WisdomTree Asia Defense

Risk-Adjusted Performance

Weakest

Over the last 90 days WisdomTree Asia Defense has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Banking Fund Investor

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Banking Fund Investor are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Banking Fund may actually be approaching a critical reversion point that can send shares even higher in January 2026.

Pair Trading with WisdomTree Asia and Banking Fund

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

The idea behind WisdomTree Asia Defense and Banking Fund Investor 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.