Correlation Between Arrow ETF and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both Arrow ETF 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 Arrow ETF and WisdomTree Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow ETF Trust and WisdomTree Japan SmallCap, you can compare the effects of market volatilities on Arrow ETF 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 Arrow ETF with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow ETF and WisdomTree Japan.
Diversification Opportunities for Arrow ETF and WisdomTree Japan
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Arrow and WisdomTree is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Arrow ETF Trust 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 Arrow ETF 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 Arrow ETF Trust 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 Arrow ETF i.e., Arrow ETF and WisdomTree Japan go up and down completely randomly.
Pair Corralation between Arrow ETF and WisdomTree Japan
Given the investment horizon of 90 days Arrow ETF is expected to generate 2.87 times less return on investment than WisdomTree Japan. But when comparing it to its historical volatility, Arrow ETF Trust is 1.37 times less risky than WisdomTree Japan. It trades about 0.03 of its potential returns per unit of risk. WisdomTree Japan SmallCap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,115 in WisdomTree Japan SmallCap on March 19, 2025 and sell it today you would earn a total of 320.00 from holding WisdomTree Japan SmallCap or generate 3.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow ETF Trust vs. WisdomTree Japan SmallCap
Performance |
| Timeline |
| Arrow ETF Trust |
| WisdomTree Japan SmallCap |
Arrow ETF and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow ETF and WisdomTree Japan
The main advantage of trading using opposite Arrow ETF and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow ETF 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.| Arrow ETF vs. iShares Morningstar Multi Asset | Arrow ETF vs. Amplify High Income | Arrow ETF vs. First Trust Multi Asset | Arrow ETF vs. SPDR SSgA Income |
| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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