Correlation Between Avantis Small and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both Avantis Small and WisdomTree SmallCap 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 Avantis Small and WisdomTree SmallCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avantis Small Cap and WisdomTree SmallCap Earnings, you can compare the effects of market volatilities on Avantis Small and WisdomTree SmallCap 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 Avantis Small with a short position of WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Small and WisdomTree SmallCap.
Diversification Opportunities for Avantis Small and WisdomTree SmallCap
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Avantis and WisdomTree is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap and WisdomTree SmallCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and Avantis Small 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 Avantis Small Cap are associated (or correlated) with WisdomTree SmallCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SmallCap has no effect on the direction of Avantis Small i.e., Avantis Small and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between Avantis Small and WisdomTree SmallCap
Given the investment horizon of 90 days Avantis Small is expected to generate 1.29 times less return on investment than WisdomTree SmallCap. But when comparing it to its historical volatility, Avantis Small Cap is 1.0 times less risky than WisdomTree SmallCap. It trades about 0.08 of its potential returns per unit of risk. WisdomTree SmallCap Earnings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,819 in WisdomTree SmallCap Earnings on September 1, 2024 and sell it today you would earn a total of 1,000.00 from holding WisdomTree SmallCap Earnings or generate 20.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Avantis Small Cap vs. WisdomTree SmallCap Earnings
Performance |
| Timeline |
| Avantis Small Cap |
| WisdomTree SmallCap |
Avantis Small and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantis Small and WisdomTree SmallCap
The main advantage of trading using opposite Avantis Small and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Small position performs unexpectedly, WisdomTree SmallCap 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 SmallCap will offset losses from the drop in WisdomTree SmallCap's long position.| Avantis Small vs. Dimensional ETF Trust | Avantis Small vs. Vanguard Small Cap Index | Avantis Small vs. First Trust Multi Manager | Avantis Small vs. Vanguard SP Small Cap |
| WisdomTree SmallCap vs. WisdomTree MidCap Earnings | WisdomTree SmallCap vs. WisdomTree Earnings 500 | WisdomTree SmallCap vs. Invesco SP SmallCap | WisdomTree SmallCap vs. Invesco FTSE RAFI |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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