Correlation Between WisdomTree India and IShares MSCI

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

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

Diversification Opportunities for WisdomTree India and IShares MSCI

0.54

Correlation Coefficient

WisdomTree India  IShares MSCI

Very weak diversification

The 3 months correlation between WisdomTree and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree India Earnings and iShares MSCI India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI India and WisdomTree India 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 India Earnings are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI India has no effect on the direction of WisdomTree India i.e., WisdomTree India and IShares MSCI go up and down completely randomly.

Pair Corralation between WisdomTree India and IShares MSCI

Considering the 90-day investment horizon WisdomTree India is expected to generate 1.77 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, WisdomTree India Earnings is 1.34 times less risky than IShares MSCI. It trades about 0.32 of its potential returns per unit of risk. iShares MSCI India is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  6,908  in iShares MSCI India on January 24, 2024 and sell it today you would earn a total of  480.00  from holding iShares MSCI India or generate 6.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

WisdomTree India Earnings  vs.  iShares MSCI India

WisdomTree India Earnings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree India Earnings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, WisdomTree India is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

iShares MSCI India

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI India are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree India and IShares MSCI

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

The idea behind WisdomTree India Earnings and iShares MSCI India 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.