Correlation Between WisdomTree SmallCap and IShares Core
Can any of the company-specific risk be diversified away by investing in both WisdomTree SmallCap and IShares Core 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 IShares Core 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 iShares Core Dividend, you can compare the effects of market volatilities on WisdomTree SmallCap and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and IShares Core.
Diversification Opportunities for WisdomTree SmallCap and IShares Core
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Dividend and iShares Core Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Dividend 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Dividend has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and IShares Core go up and down completely randomly.
Pair Corralation between WisdomTree SmallCap and IShares Core
Considering the 90-day investment horizon WisdomTree SmallCap Dividend is expected to generate 1.82 times more return on investment than IShares Core. However, WisdomTree SmallCap is 1.82 times more volatile than iShares Core Dividend. It trades about 0.05 of its potential returns per unit of risk. iShares Core Dividend is currently generating about 0.09 per unit of risk. If you would invest 2,775 in WisdomTree SmallCap Dividend on August 29, 2024 and sell it today you would earn a total of 952.00 from holding WisdomTree SmallCap Dividend or generate 34.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree SmallCap Dividend vs. iShares Core Dividend
Performance |
| Timeline |
| WisdomTree SmallCap |
| iShares Core Dividend |
WisdomTree SmallCap and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree SmallCap and IShares Core
The main advantage of trading using opposite WisdomTree SmallCap and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree SmallCap position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.The idea behind WisdomTree SmallCap Dividend and iShares Core Dividend 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.
| IShares Core vs. iShares Core High | IShares Core vs. Schwab Dividend Equity | IShares Core vs. ProShares SP 500 | IShares Core vs. Invesco SP 500 |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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