Correlation Between IShares JPX and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both IShares JPX 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 IShares JPX and WisdomTree Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares JPX Nikkei 400 and WisdomTree Japan Hedged, you can compare the effects of market volatilities on IShares JPX 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 IShares JPX with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares JPX and WisdomTree Japan.
Diversification Opportunities for IShares JPX and WisdomTree Japan
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and WisdomTree is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares JPX Nikkei 400 and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged and IShares JPX 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 iShares JPX Nikkei 400 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 Hedged has no effect on the direction of IShares JPX i.e., IShares JPX and WisdomTree Japan go up and down completely randomly.
Pair Corralation between IShares JPX and WisdomTree Japan
Given the investment horizon of 90 days iShares JPX Nikkei 400 is expected to generate 0.75 times more return on investment than WisdomTree Japan. However, iShares JPX Nikkei 400 is 1.34 times less risky than WisdomTree Japan. It trades about 0.05 of its potential returns per unit of risk. WisdomTree Japan Hedged is currently generating about 0.01 per unit of risk. If you would invest 7,476 in iShares JPX Nikkei 400 on March 22, 2025 and sell it today you would earn a total of 342.00 from holding iShares JPX Nikkei 400 or generate 4.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares JPX Nikkei 400 vs. WisdomTree Japan Hedged
Performance |
| Timeline |
| iShares JPX Nikkei |
| WisdomTree Japan Hedged |
IShares JPX and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares JPX and WisdomTree Japan
The main advantage of trading using opposite IShares JPX and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares JPX 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.| IShares JPX vs. iShares MSCI Japan | IShares JPX vs. iShares Currency Hedged | IShares JPX vs. iShares MSCI United |
| WisdomTree Japan vs. WisdomTree Europe Hedged | WisdomTree Japan vs. WisdomTree Japan SmallCap | WisdomTree Japan vs. WisdomTree Europe SmallCap | WisdomTree Japan vs. iShares MSCI Japan |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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