Correlation Between WisdomTree Emerging and American Century

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

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

Diversification Opportunities for WisdomTree Emerging and American Century

-0.35

Correlation Coefficient

WisdomTree Emerging  American Century

Very good diversification

The 3 months correlation between WisdomTree and American is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and American Century One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century One and WisdomTree Emerging 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 Emerging Markets are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century One has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and American Century go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and American Century

Allowing for the 90-day total investment horizon WisdomTree Emerging is expected to generate 1.37 times less return on investment than American Century. In addition to that, WisdomTree Emerging is 1.35 times more volatile than American Century One. It trades about 0.06 of its total potential returns per unit of risk. American Century One is currently generating about 0.12 per unit of volatility. If you would invest  906.00  in American Century One on September 12, 2024 and sell it today you would earn a total of  270.00  from holding American Century One or generate 29.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

WisdomTree Emerging Markets  vs.  American Century One

WisdomTree Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, WisdomTree Emerging is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

American Century One

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Century One are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, American Century may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WisdomTree Emerging and American Century

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

The idea behind WisdomTree Emerging Markets and American Century One 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.