Correlation Between Vanguard Real and WisdomTree Europe

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Can any of the company-specific risk be diversified away by investing in both Vanguard Real and WisdomTree Europe 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 Vanguard Real and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Real Estate and WisdomTree Europe Hedged, you can compare the effects of market volatilities on Vanguard Real and WisdomTree Europe 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 Vanguard Real with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Real and WisdomTree Europe.

Diversification Opportunities for Vanguard Real and WisdomTree Europe

  Correlation Coefficient

Poor diversification

The 3 months correlation between Vanguard and WisdomTree is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Real Estate and WisdomTree Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Hedged and Vanguard Real 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 Vanguard Real Estate are associated (or correlated) with WisdomTree Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Hedged has no effect on the direction of Vanguard Real i.e., Vanguard Real and WisdomTree Europe go up and down completely randomly.

Pair Corralation between Vanguard Real and WisdomTree Europe

Considering the 90-day investment horizon Vanguard Real Estate is expected to generate 1.64 times more return on investment than WisdomTree Europe. However, Vanguard Real is 1.64 times more volatile than WisdomTree Europe Hedged. It trades about -0.06 of its potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about -0.11 per unit of risk. If you would invest  8,128  in Vanguard Real Estate on March 3, 2023 and sell it today you would lose (114.00)  from holding Vanguard Real Estate or give up 1.4% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Vanguard Real Estate  vs.  WisdomTree Europe Hedged

 Performance (%) 
Vanguard Real Estate 

Vanguard Performance

0 of 100

Over the last 90 days Vanguard Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.
WisdomTree Europe Hedged 

WisdomTree Performance

0 of 100

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

Vanguard Real and WisdomTree Europe Volatility Contrast

   Predicted Return Density   

Pair Trading with Vanguard Real and WisdomTree Europe

The main advantage of trading using opposite Vanguard Real and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Real position performs unexpectedly, WisdomTree Europe 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 Europe will offset losses from the drop in WisdomTree Europe's long position.
The idea behind Vanguard Real Estate and WisdomTree Europe Hedged 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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