Correlation Between Pacer Small and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both Pacer 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 Pacer 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 Pacer Small Cap and WisdomTree SmallCap Quality, you can compare the effects of market volatilities on Pacer 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 Pacer Small with a short position of WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Small and WisdomTree SmallCap.
Diversification Opportunities for Pacer Small and WisdomTree SmallCap
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pacer and WisdomTree is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Small Cap and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and Pacer 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 Pacer 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 Pacer Small i.e., Pacer Small and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between Pacer Small and WisdomTree SmallCap
Given the investment horizon of 90 days Pacer Small is expected to generate 1.25 times less return on investment than WisdomTree SmallCap. In addition to that, Pacer Small is 1.08 times more volatile than WisdomTree SmallCap Quality. It trades about 0.05 of its total potential returns per unit of risk. WisdomTree SmallCap Quality is currently generating about 0.06 per unit of volatility. If you would invest 3,948 in WisdomTree SmallCap Quality on August 30, 2024 and sell it today you would earn a total of 1,653 from holding WisdomTree SmallCap Quality or generate 41.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacer Small Cap vs. WisdomTree SmallCap Quality
Performance |
| Timeline |
| Pacer Small Cap |
| WisdomTree SmallCap |
Pacer Small and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacer Small and WisdomTree SmallCap
The main advantage of trading using opposite Pacer Small and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer 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.| Pacer Small vs. Pacer Cash Cows | Pacer Small vs. Pacer Global Cash | Pacer Small vs. Pacer Developed Markets | Pacer Small vs. Invesco SP SmallCap |
| WisdomTree SmallCap vs. WisdomTree Emerging Markets | WisdomTree SmallCap vs. WisdomTree Interest Rate | WisdomTree SmallCap vs. WisdomTree Japan Hedged | WisdomTree SmallCap vs. WisdomTree Interest Rate |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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