Correlation Between WisdomTree Emerging and First Trust

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Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and First Trust 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 First Trust 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 First Trust RiverFront, you can compare the effects of market volatilities on WisdomTree Emerging and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and First Trust.

Diversification Opportunities for WisdomTree Emerging and First Trust

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between WisdomTree and First is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and First Trust RiverFront in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust RiverFront 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust RiverFront has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and First Trust go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and First Trust

Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to generate 1.03 times more return on investment than First Trust. However, WisdomTree Emerging is 1.03 times more volatile than First Trust RiverFront. It trades about 0.32 of its potential returns per unit of risk. First Trust RiverFront is currently generating about 0.3 per unit of risk. If you would invest  2,967  in WisdomTree Emerging Markets on April 21, 2025 and sell it today you would earn a total of  535.00  from holding WisdomTree Emerging Markets or generate 18.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

WisdomTree Emerging Markets  vs.  First Trust RiverFront

 Performance 
       Timeline  
WisdomTree Emerging 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Markets are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, WisdomTree Emerging exhibited solid returns over the last few months and may actually be approaching a breakup point.
First Trust RiverFront 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in First Trust RiverFront are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, First Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Emerging and First Trust Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WisdomTree Emerging and First Trust

The main advantage of trading using opposite WisdomTree Emerging and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.
The idea behind WisdomTree Emerging Markets and First Trust RiverFront 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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