Correlation Between WisdomTree SmallCap and IndexIQ
Can any of the company-specific risk be diversified away by investing in both WisdomTree SmallCap and IndexIQ 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 SmallCap and IndexIQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree SmallCap Dividend and IndexIQ, you can compare the effects of market volatilities on WisdomTree SmallCap and IndexIQ 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 SmallCap with a short position of IndexIQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and IndexIQ.
Diversification Opportunities for WisdomTree SmallCap and IndexIQ
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and IndexIQ is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Dividend and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and WisdomTree SmallCap 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 SmallCap Dividend are associated (or correlated) with IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and IndexIQ go up and down completely randomly.
Pair Corralation between WisdomTree SmallCap and IndexIQ
Considering the 90-day investment horizon WisdomTree SmallCap Dividend is expected to generate 1.01 times more return on investment than IndexIQ. However, WisdomTree SmallCap is 1.01 times more volatile than IndexIQ. It trades about 0.06 of its potential returns per unit of risk. IndexIQ is currently generating about 0.03 per unit of risk. If you would invest 2,770 in WisdomTree SmallCap Dividend on August 28, 2024 and sell it today you would earn a total of 999.00 from holding WisdomTree SmallCap Dividend or generate 36.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 31.72% |
| Values | Daily Returns |
WisdomTree SmallCap Dividend vs. IndexIQ
Performance |
| Timeline |
| WisdomTree SmallCap |
| IndexIQ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
WisdomTree SmallCap and IndexIQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree SmallCap and IndexIQ
The main advantage of trading using opposite WisdomTree SmallCap and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree SmallCap position performs unexpectedly, IndexIQ 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 IndexIQ will offset losses from the drop in IndexIQ's long position.The idea behind WisdomTree SmallCap Dividend and IndexIQ pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| IndexIQ vs. VictoryShares Discovery Enhanced | IndexIQ vs. First Trust Mid | IndexIQ vs. First Trust Small |
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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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