Correlation Between IShares MSCI and WisdomTree India

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

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

Diversification Opportunities for IShares MSCI and WisdomTree India

0.57

Correlation Coefficient

IShares MSCI  WisdomTree India

Very weak diversification

The 3 months correlation between IShares and WisdomTree is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI India and WisdomTree India Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree India Earnings and IShares MSCI 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 iShares MSCI India are associated (or correlated) with WisdomTree India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree India Earnings has no effect on the direction of IShares MSCI i.e., IShares MSCI and WisdomTree India go up and down completely randomly.

Pair Corralation between IShares MSCI and WisdomTree India

Given the investment horizon of 90 days iShares MSCI India is expected to generate 1.36 times more return on investment than WisdomTree India. However, IShares MSCI is 1.36 times more volatile than WisdomTree India Earnings. It trades about 0.45 of its potential returns per unit of risk. WisdomTree India Earnings is currently generating about 0.32 per unit of risk. If you would invest  6,931  in iShares MSCI India on January 26, 2024 and sell it today you would earn a total of  544.00  from holding iShares MSCI India or generate 7.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

iShares MSCI India  vs.  WisdomTree India Earnings

iShares MSCI India

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI India are ranked lower than 5 (%) 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.

WisdomTree India Earnings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree India Earnings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, WisdomTree India may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with IShares MSCI and WisdomTree India

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

The idea behind iShares MSCI India and WisdomTree India Earnings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.