Correlation Between First Trust and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and WisdomTree Europe SmallCap, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WisdomTree Europe.
Diversification Opportunities for First Trust and WisdomTree Europe
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and WisdomTree is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and WisdomTree Europe SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe and First Trust 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 First Trust Dorsey 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 has no effect on the direction of First Trust i.e., First Trust and WisdomTree Europe go up and down completely randomly.
Pair Corralation between First Trust and WisdomTree Europe
Given the investment horizon of 90 days First Trust Dorsey is expected to generate 1.01 times more return on investment than WisdomTree Europe. However, First Trust is 1.01 times more volatile than WisdomTree Europe SmallCap. It trades about 0.2 of its potential returns per unit of risk. WisdomTree Europe SmallCap is currently generating about 0.05 per unit of risk. If you would invest 2,898 in First Trust Dorsey on June 8, 2025 and sell it today you would earn a total of 281.00 from holding First Trust Dorsey or generate 9.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. WisdomTree Europe SmallCap
Performance |
| Timeline |
| First Trust Dorsey |
| WisdomTree Europe |
First Trust and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and WisdomTree Europe
The main advantage of trading using opposite First Trust and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. First Trust Dorsey | First Trust vs. First Trust RBA | First Trust vs. First Trust Dorsey | First Trust vs. First Trust Bloomberg |
| WisdomTree Europe vs. WisdomTree International MidCap | WisdomTree Europe vs. WisdomTree Global High | WisdomTree Europe vs. WisdomTree International SmallCap | WisdomTree Europe vs. WisdomTree Japan SmallCap |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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