Correlation Between WisdomTree Europe and Jpmorgan International

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

By analyzing existing cross correlation between WisdomTree Europe Hedged and Jpmorgan International Equity, you can compare the effects of market volatilities on WisdomTree Europe and Jpmorgan International 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 Europe with a short position of Jpmorgan International. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and Jpmorgan International.

Diversification Opportunities for WisdomTree Europe and Jpmorgan International

0.95

Correlation Coefficient

WisdomTree Europe  Jpmorgan International

Almost no diversification

The 3 months correlation between WisdomTree and Jpmorgan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Hedged and Jpmorgan International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan International and WisdomTree Europe 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 Europe Hedged are associated (or correlated) with Jpmorgan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan International has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and Jpmorgan International go up and down completely randomly.

Pair Corralation between WisdomTree Europe and Jpmorgan International

Given the investment horizon of 90 days WisdomTree Europe Hedged is expected to generate 0.94 times more return on investment than Jpmorgan International. However, WisdomTree Europe Hedged is 1.06 times less risky than Jpmorgan International. It trades about -0.08 of its potential returns per unit of risk. Jpmorgan International Equity is currently generating about -0.14 per unit of risk. If you would invest  4,797  in WisdomTree Europe Hedged on January 26, 2024 and sell it today you would lose (53.00) from holding WisdomTree Europe Hedged or give up 1.1% of portfolio value over 90 days.

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

WisdomTree Europe Hedged  vs.  Jpmorgan International Equity

WisdomTree Europe Hedged

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Europe Hedged are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, WisdomTree Europe may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Jpmorgan International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan International Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Jpmorgan International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree Europe and Jpmorgan International

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

The idea behind WisdomTree Europe Hedged and Jpmorgan International Equity 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..