Correlation Between WisdomTree China and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both WisdomTree China 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 WisdomTree China and WisdomTree SmallCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree China ex State Owned and WisdomTree SmallCap Quality, you can compare the effects of market volatilities on WisdomTree China 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 WisdomTree China with a short position of WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree China and WisdomTree SmallCap.
Diversification Opportunities for WisdomTree China and WisdomTree SmallCap
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree China ex State Owne and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and WisdomTree China 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 China ex State Owned 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 WisdomTree China i.e., WisdomTree China and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between WisdomTree China and WisdomTree SmallCap
Given the investment horizon of 90 days WisdomTree China is expected to generate 2.64 times less return on investment than WisdomTree SmallCap. But when comparing it to its historical volatility, WisdomTree China ex State Owned is 1.21 times less risky than WisdomTree SmallCap. It trades about 0.08 of its potential returns per unit of risk. WisdomTree SmallCap Quality is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,933 in WisdomTree SmallCap Quality on September 27, 2025 and sell it today you would earn a total of 142.00 from holding WisdomTree SmallCap Quality or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree China ex State Owne vs. WisdomTree SmallCap Quality
Performance |
| Timeline |
| WisdomTree China |
| WisdomTree SmallCap |
WisdomTree China and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree China and WisdomTree SmallCap
The main advantage of trading using opposite WisdomTree China and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree China 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.| WisdomTree China vs. WisdomTree International Equity | WisdomTree China vs. iShares Morningstar Small Cap | WisdomTree China vs. WisdomTree SmallCap Earnings | WisdomTree China vs. Longview Advantage ETF |
| WisdomTree SmallCap vs. WisdomTree Japan SmallCap | WisdomTree SmallCap vs. iShares MSCI Sweden | WisdomTree SmallCap vs. iShares MSCI Emerging | WisdomTree SmallCap vs. JPMorgan Diversified Return |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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