Correlation Between Xtrackers MSCI and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and WisdomTree Japan 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 Xtrackers MSCI and WisdomTree Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI Japan and WisdomTree Japan SmallCap, you can compare the effects of market volatilities on Xtrackers MSCI and WisdomTree Japan 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 Xtrackers MSCI with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and WisdomTree Japan.
Diversification Opportunities for Xtrackers MSCI and WisdomTree Japan
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Xtrackers and WisdomTree is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Japan and WisdomTree Japan SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan SmallCap and Xtrackers 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 Xtrackers MSCI Japan are associated (or correlated) with WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan SmallCap has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and WisdomTree Japan go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and WisdomTree Japan
Given the investment horizon of 90 days Xtrackers MSCI Japan is expected to under-perform the WisdomTree Japan. In addition to that, Xtrackers MSCI is 1.97 times more volatile than WisdomTree Japan SmallCap. It trades about -0.06 of its total potential returns per unit of risk. WisdomTree Japan SmallCap is currently generating about 0.11 per unit of volatility. If you would invest 8,277 in WisdomTree Japan SmallCap on March 23, 2025 and sell it today you would earn a total of 139.00 from holding WisdomTree Japan SmallCap or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Xtrackers MSCI Japan vs. WisdomTree Japan SmallCap
Performance |
| Timeline |
| Xtrackers MSCI Japan |
| WisdomTree Japan SmallCap |
Xtrackers MSCI and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and WisdomTree Japan
The main advantage of trading using opposite Xtrackers MSCI and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI position performs unexpectedly, WisdomTree Japan 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 Japan will offset losses from the drop in WisdomTree Japan's long position.| Xtrackers MSCI vs. iShares Currency Hedged | Xtrackers MSCI vs. Xtrackers MSCI Europe | Xtrackers MSCI vs. Xtrackers MSCI EAFE | Xtrackers MSCI vs. WisdomTree Japan Hedged |
| WisdomTree Japan vs. WisdomTree Global ex US | WisdomTree Japan vs. WisdomTree Europe SmallCap | WisdomTree Japan vs. WisdomTree International MidCap | WisdomTree Japan vs. WisdomTree Global High |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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