Correlation Between WisdomTree SmallCap and Vanguard Russell
Can any of the company-specific risk be diversified away by investing in both WisdomTree SmallCap and Vanguard Russell 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 Vanguard Russell 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 Vanguard Russell 2000, you can compare the effects of market volatilities on WisdomTree SmallCap and Vanguard Russell 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 Vanguard Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and Vanguard Russell.
Diversification Opportunities for WisdomTree SmallCap and Vanguard Russell
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between WisdomTree and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Dividend and Vanguard Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Russell 2000 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 Vanguard Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Russell 2000 has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and Vanguard Russell go up and down completely randomly.
Pair Corralation between WisdomTree SmallCap and Vanguard Russell
Considering the 90-day investment horizon WisdomTree SmallCap Dividend is expected to generate 1.01 times more return on investment than Vanguard Russell. However, WisdomTree SmallCap is 1.01 times more volatile than Vanguard Russell 2000. It trades about 0.25 of its potential returns per unit of risk. Vanguard Russell 2000 is currently generating about 0.23 per unit of risk. If you would invest 3,448 in WisdomTree SmallCap Dividend on August 28, 2024 and sell it today you would earn a total of 321.00 from holding WisdomTree SmallCap Dividend or generate 9.31% 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. Vanguard Russell 2000
Performance |
| Timeline |
| WisdomTree SmallCap |
| Vanguard Russell 2000 |
WisdomTree SmallCap and Vanguard Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree SmallCap and Vanguard Russell
The main advantage of trading using opposite WisdomTree SmallCap and Vanguard Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree SmallCap position performs unexpectedly, Vanguard Russell 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 Vanguard Russell will offset losses from the drop in Vanguard Russell's long position.The idea behind WisdomTree SmallCap Dividend and Vanguard Russell 2000 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.
| Vanguard Russell vs. Dimensional ETF Trust | Vanguard Russell vs. Vanguard Small Cap Index | Vanguard Russell vs. First Trust Multi Manager | Vanguard Russell vs. Vanguard SP Small Cap |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |