Correlation Between WisdomTree Europe and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Europe Quality and First Trust Dow, you can compare the effects of market volatilities on WisdomTree Europe and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and First Trust.
Diversification Opportunities for WisdomTree Europe and First Trust
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between WisdomTree and First is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe Quality and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow 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 Quality are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dow has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree Europe and First Trust
Given the investment horizon of 90 days WisdomTree Europe Quality is expected to generate 1.12 times more return on investment than First Trust. However, WisdomTree Europe is 1.12 times more volatile than First Trust Dow. It trades about 0.23 of its potential returns per unit of risk. First Trust Dow is currently generating about 0.22 per unit of risk. If you would invest 3,358 in WisdomTree Europe Quality on June 6, 2025 and sell it today you would earn a total of 122.00 from holding WisdomTree Europe Quality or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe Quality vs. First Trust Dow
Performance |
| Timeline |
| WisdomTree Europe Quality |
| First Trust Dow |
WisdomTree Europe and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and First Trust
The main advantage of trading using opposite WisdomTree Europe and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| WisdomTree Europe vs. WisdomTree Dynamic Currency | WisdomTree Europe vs. WisdomTree Emerging Markets | WisdomTree Europe vs. ProShares MSCI Europe | WisdomTree Europe vs. WisdomTree International Hedged |
| First Trust vs. First Trust STOXX | First Trust vs. First Trust Morningstar | First Trust vs. SPDR SP International | First Trust vs. WisdomTree International 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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