Correlation Between WisdomTree SmallCap and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree SmallCap and First Trust 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 First Trust 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 First Trust Materials, you can compare the effects of market volatilities on WisdomTree SmallCap and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and First Trust.
Diversification Opportunities for WisdomTree SmallCap and First Trust
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Dividend and First Trust Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Materials 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Materials has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree SmallCap and First Trust
Considering the 90-day investment horizon WisdomTree SmallCap is expected to generate 2.02 times less return on investment than First Trust. But when comparing it to its historical volatility, WisdomTree SmallCap Dividend is 1.38 times less risky than First Trust. It trades about 0.18 of its potential returns per unit of risk. First Trust Materials is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 6,271 in First Trust Materials on November 28, 2025 and sell it today you would earn a total of 1,547 from holding First Trust Materials or generate 24.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree SmallCap Dividend vs. First Trust Materials
Performance |
| Timeline |
| WisdomTree SmallCap |
| First Trust Materials |
WisdomTree SmallCap and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree SmallCap and First Trust
The main advantage of trading using opposite WisdomTree SmallCap and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree SmallCap position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| WisdomTree SmallCap vs. WisdomTree Emerging Markets | WisdomTree SmallCap vs. WisdomTree Europe Hedged | WisdomTree SmallCap vs. iShares Global Energy | WisdomTree SmallCap vs. iShares Financial Services |
| First Trust vs. First Trust Japan | First Trust vs. First Trust Consumer | First Trust vs. First Trust Mid | First Trust vs. Invesco Exchange Traded |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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